New Mexico First-Time Home Buyer

What to know about buying a house in New Mexico

Home prices in New Mexico are a little below the national average. That’s good news for first-time home buyers; although prices were rising quickly between 2021 and 2022.

Luckily, the state can offer help to first-time home buyers in need.

New Mexico’s Mortgage Finance Authority has down payment assistance programs that, if you qualify, could help you bridge the gap between your savings and your down payment. Read on for details about that, plus other essential information for first-time buyers.

In this article (Skip to…)

New Mexico home buyer overview

The median list price in New Mexico was $292,300 in January 2022 according to the New Mexico Association of Realtors. Home prices statewide were up 16.9% year-over-year that month. That’s a steep increase. But luckily, there are a variety of assistance programs in New Mexico that can help you overcome rising prices and afford your own home.

New Mexico home buyer stats

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in New Mexico

If you’re a first-time home buyer in New Mexico with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low–down–payment mortgage programs:

• Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan — Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often start at 640. Low mortgage insurance rates
• New Mexico MFA loans — Get one of these to access down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

NM first-time home buyer programs

The New Mexico Mortgage Finance Authority (MFA) has two mortgage programs that can help any New Mexico first-time home buyer on a low or moderate income.

• FirstHome may be better for those with moderate earnings
• HomeNow could suit those with below-average incomes

You’ll need to be in one of these state-run loan programs if you want to take advantage of the MFA’s down payment assistance program, FirstDown (see below).

There are caps on the amount you can earn that vary by program, county, and household size. To see the cap that applies to you, download MFA’s FirstHome fact sheet (in English or Spanish) or the HomeNow one, also in English and Spanish. You’ll also find details of home purchase price limits in those.

Whichever of the two programs you prefer, you face a few other qualifying hurdles. You must:

• Have a credit score of 620 or higher (although the MFA may consider alternative indicators of creditworthiness in special circumstances)
• Choose a lender from a list of participating lenders
• Complete a home buyer education course
• Be able to show at least two years of steady employment
• Have you employer verify that your employment situation is likely stable
• Have a reasonable debt-to-income ratio
• Provide documentation revealing your financial situation

Most of those are things every mortgage lender would require. But the credit score threshold is higher than you’d need for an FHA loan.

NM first-time home buyer grants

MFA doesn’t offer grants to New Mexico first-time home buyers. But, under its FirstDown program it does provide the next best thing: forgivable loans.

These “silent” second mortgages have no monthly payments and charge 0% interest. And, as long as you own and live in the home (without refinancing) for 10 years, the loan is forgiven. But, if you sell, move, or refinance before the end of the 10^th year, you’ll have to pay back the entire sum you borrowed.

You must contribute $500 of your own money to your purchase transaction. But the state’s loan may, perhaps, cover the rest. Because you can borrow up to 8% of your next home’s purchase price, capped at $8,000.

Combined, that’s just about enough to cover a 3% down payment on the state’s average home price of $292,300.

Buying a home in New Mexico’s major cities

Home prices in New Mexico’s biggest cities are relatively close to the statewide average. So buyers in these metro areas don’t need to worry as much about the massive price increases seen in the major hubs of some other states.

Albuquerque first–time home buyers

In January 2022, the median list price of homes in Albuquerque was $299,900. That was an increase of 15.4% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,000 for 3% down payment
• $59,980 for 20% down payment

Although the City of Albuquerque refers to down payment assistance on its website, we could find no details about the program. All it says is, “The HOME budget includes housing rehabilitation, down payment assistance, and affordable housing development.” But the link takes you to the U.S. Department of Housing and Urban Development’s website. You could request further information by calling the city at (505) 768-2860.

Another page on the city’s website is headed “Purchasing an Affordable Home.” But that refers you to third-party organizations.

Las Cruces first–time home buyers

In January 2022, the median list price of homes in Las Cruces was $266,500. That was an increase of 17.4% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $8,000 for 3% down payment
• $53,300 for 20% down payment

Unfortunately, we couldn’t find any trace of a down payment assistance program on the City of Las Cruces website. But you could call (575) 541-2000 to check we didn’t miss anything.

Otherwise, you may have to fall back on the statewide MFA offering (details above).

Rio Rancho first–time home buyers

In January 2022, the median list price of homes in Rio Rancho was $329,000 That was an increase of 21.9% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,870 for 3% down payment
• $65,800 for 20% down payment

The Rio Rancho city website describes a down payment assistance program that’s similar to MFA’s offering. It’s a “silent” forgivable loan with no monthly payments and a 0% interest rate. But it differs in two important respects:

1. You can borrow less — “No more than 50% of the required down payment and reasonable closing costs … up to a maximum of $5,000”
2. But, provided you meet its conditions, the loan is forgiven after only five years. That’s half the 10-year forgiveness period under the MFA program

That second point could be very valuable and worth taking a hit on the amount you borrow. Because many homeowners, especially in fast-growing metro areas, such as Rio Rancho, stay in their homes for less than 10 years. So if you plan to move on between five and 10 years after you purchase, the city’s program may be more beneficial than the state’s.

Where to find home buying help in New Mexico

All the organizations we’ve listed above should provide advice freely to any first–time home buyer in the state of New Mexico or within their areas.

But, in addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides lists of statewide, regional, and local resources:

Statewide and regional first-time home buyer programs in New Mexico

New Mexico first-time home buyer programs by city/town

What are today’s mortgage rates in New Mexico?

You can see today’s live mortgage rates in New Mexico here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

¹ Source: Experian.com 2021 study of 2020 data

²Based on a review of the state’s available DPA grants at the time this was written