Published July 4, 2016
When first-time buyers Roman Banuelos and Ceci Frith decided it was time to purchase a Las Cruces area home for themselves and their two children, they were surprised to learn that they needed just $500 to swing the deal. Assistance from the New Mexico Mortgage Finance Authority (MFA) was the key to their successful purchase.
“MFA is the state’s official housing agency”, said Homeownership Representative, Teri Baca, during a recent interview. Baca went on to say that the Banuelos-Frith family was one of 1,456 homebuyers who purchased using MFA assistance in 2015. By the time the year came to a close, MFA had provided $189 million in first-mortgage loans and $7.4 million in down payment assistance to the first and second-time New Mexico buyers who utilized the programs. Down payment assistance was provided in the form of second-mortgage loans and grants.
To be eligible for assistance, first and second-time buyers must have a minimum credit score of 620 and sufficient income to comfortably make their monthly payments. They must also choose a home that is priced at or below the particular program limits. On June 27th, MFA increased income and price limits in some areas of the state, including Las Cruces. Complete program details can be found on MFA’s website www.housingnm.com.
In Southern New Mexico, the maximum income limits for first-time buyers were increased to $59,453 for one-to-two person households, and $67,267 for 3 or more person households. The current maximum home price is $255,574. Higher income and price limits are offered to buyers who purchase in federally targeted areas.
A targeted area, of which there are seven in Dona Ana County, are census tracts in which at least 70 percent of the households earn no more than 80 percent of the statewide median income. Income limits reach $67,200 for one-to-two person households, and $78,400 for households of three or more. The maximum purchase price rises to $350,000.
The programs are straight-forward and easy to understand. The First Home and First Down programs are designed for first-time buyers who have not owned a home in which they lived during the past three years. First Home is a 30-year, fixed-rate first mortgage, and First Down is the down payment assistance program. The down payment assistance is in the form of a 30-year, fixed rate second mortgage that bridges the gap between the required down payment and closing costs and MFA’s minimum investment requirement of $500.
A typical example would be the purchase of a $150,000 home utilizing FHA financing guidelines, which require a down payment of 3.5% of the purchase price ($5,250) and closing costs of around $2,800. To bridge the gap between the required $8,050 and MFA’s $500 minimum investment, MFA provides a second mortgage of $7,550. The amount of the second loan can be as much as $8,000.
The Next Home program is structured much in the same way as the First Home option, and can be used by first-time buyers as well as buyers who currently own a home or have lived in a home they owned during the past 3-years. A grant, equal to 3-percent of the borrower’s loan amount, takes the the place of the second mortgage and does not have to be paid back.
At today’s mortgage rates, borrowers can estimate their monthly payment of principal, interest, taxes, insurance and mortgage insurance by utilizing a ballpark factor of $7.00 per month for every $1,000 borrowed. In the case of our $150,000 example, the borrower’s total cash investment would be $500 and their monthly payment would be around $1,050. Who wouldn’t benefit from a deal like that? The Banuelos-Frith family certainly did.
See you at closing!