13 First-time Home Buyer Tips Santa Fe Buyers Need to Know

Buying a home for the first time is an exciting and sometimes daunting experience. To make matters worse, properties in New Mexico are priced higher than the national average, so qualifying for a mortgage loan may be difficult without a little help.

However, finding a mortgage lender and potential payment assistance programs can get confusing, which is why we have drawn up this guide to provide the information you need. If you hope to find your first home, here are 13 tips you need to know before buying Santa Fe real estate.

Who Qualifies as a First-time Home Buyer in Santa Fe?

According to New Mexico legislature, any family or person who has never bought a home in the last three years is considered a first-time buyer. The good news is that if you fall into this category, you may be eligible for one of the payment assistance programs offered by the Mortgage Finance Authority in New Mexico.

Tips for Home Buyers

Here are a few tips to ensure that your first home purchase goes as smoothly as possible:

1. Start Planning for Your New Home Early

It’s crucial to start planning for your new Santa Fe home purchase several months before you start looking for an investment property. You must ensure that you have a good credit score because you will probably require a mortgage.

Obtain a copy of your credit report, then review it carefully for accuracy. Any issues you find that might be lowering your score should be immediately challenged and fixed. Avoid making major decisions before house hunting that could negatively impact your rating, such as applying for a new credit card or personal loan.

2. Know Your Purchase Price Limits

It helps to know your purchase price limits and how much of your own money you can invest in a property in the form of monthly payments. You can find several online tools to help you calculate your purchase price limits and receive pre-approval for a home loan.

Knowing from the start what price range you qualify for can prevent disappointment later when you find a home you really love but find that you cannot afford it.

Find out in advance how much your homeowner’s insurance, property taxes, and Homeowners Association dues will cost. Additionally, be certain that you have the money set aside to plan for home improvements, repairs, rising property taxes, etc.

3. Save for a Down Payment and Get Advice from a Mortgage Lender

Another essential step before you go house hunting is to save as much as possible to make a down payment on the house you choose.

Saving your own money and making a sizeable down payment can make a massive difference to your monthly payments later. Your future self will thank you!

However, it’s important to remember that you could still be eligible for a home loan if you cannot pay a down payment, so this should not deter you from buying a home.

You can also apply for down payment assistance from the MFA (more on that later). If you’re unsure of the amount you should ideally save for a down payment, we recommend getting advice from a lender.

4. Know the Types of Loans

When you buy a home, you will need a mortgage, and before you head out to find the house of your dreams, it helps to know your options. Here are the types of loans that you can apply for to pay for your home in Santa Fe:

Conventional Loan

To be eligible for this loan, you will need to make a three percent down payment and have a minimum credit score of 620. Once your home equity reaches 20 percent, you probably won't have to pay for mortgage insurance anymore.

VA Loans

Veterans and active military personnel are the only ones that qualify for this loan. There is no down payment necessary. Depending on the mortgage lender, a minimum credit score of 620 is generally required.

After closing, there is no more ongoing mortgage insurance, and this option offers competitive interest rates. Apply if you qualify because these mortgages are undoubtedly the best.

FHA Loan

This loan is backed by the Federal Housing Administration. A minimum credit rating of 580 and a 3.5 percent down payment is required.

However, you are responsible for the mortgage insurance costs unless you refinance a new mortgage, relocate, or pay off the loan.

New Mexico MFA Down Payment Assistance Loans

The Mortgage Finance Authority in New Mexico has a down payment assistance program designed to help first-time home buyers based on certain income limits.

There are two types of MFA loans: the HomeNow Program, designed for buyers with a below-average income, and the FirstHome Program, intended for moderate-income buyers.

USDA Loan

Buyers with low to moderate incomes who are purchasing in some rural regions may be eligible for this loan. There is no down payment necessary. The lender-specific minimum credit score range often begins at 640. Another benefit is the low prices for mortgage insurance.

5. Check Whether You Qualify for Down Payment Assistance

As we’ve mentioned above, the MFA provides assistance to home buyers that haven’t purchased a home in the last three years. It’s a good idea to check whether you qualify for financial aid before trying to buy your own home.

You may receive down payment assistance in addition to closing cost aid, depending on certain income limits if you qualify for one of these programs.

These programs are available for single-family properties only, and buyers must have a minimum credit score of 620. Keep in mind that income limits vary based on the size of your family, and purchase price limits also apply.

6. Compare Mortgage Rates and Fees

To ensure that you receive competitive interest rates and affordable monthly payments, it is important to compare quotes from different lenders. Some may offer discount points that provide the opportunity to invest a certain amount to receive a discount, so it’s best to weigh your options to see which one would be more advantageous.

7. Find a Reliable Real Estate Agent

Once you have prepared financially for your new home and it’s time to look at your options, it’s a good idea to find a real estate agent you can count on. When you enlist the help of these professionals, you can expect the following:

8. Research the Area

The value of your home when you decide to sell it later will be determined by where you choose to live today. Properties with good access to neighborhood amenities and attractive curb appeal (including landscaping, lighting, and maintenance) will likely increase in value.

After all, you’re going to put a lot into your primary residence in terms of a down payment and monthly payments, so it helps to know that you’re making a good investment.

9. Look for Defects

When you purchase a home, the seller is required to disclose any latent flaws in the building. These issues include structural problems, increasing dampness, or plumbing issues that might not be readily apparent to the average person.

Because you purchase the property “as is”; after the sale is finalized, the seller is no longer responsible for any flaws. This is why it is important to be aware of any potential problems in advance because they could impact the sale price.

Having someone you expressly employ, such as a local home inspector who is certified, do a house inspection for you is a smart move before closing a deal.

Moreover, it is advantageous if the inspector has engineering experience. This could assist you in negotiating a lower price, avoiding costly errors, or confirming the value and condition of the property.

Here are some of the defects you can look out for when assessing a property:

10. Research Home Sales in the Area

When you find a property you wish to make an offer on, it is important to look at previous sales of nearby properties. You can use this as a foundation for the offer and get a good idea of whether the home’s purchase price is fair.

Generally speaking, your first offer ought to be less than the neighborhood average for sales of comparable houses. A competent Santa Fe real estate agent can assist you with performing market research on comparable home sales and figuring out first-time offers.

11. Make the Most of Open Houses

As technology advances, more people are using virtual 3D home tours. These tours enable home buyers to visit a house at any time and see details that ordinary photographs miss.

They can help you reduce the number of places you visit because they don’t provide all the details that personal inspections offer, such as how the carpets smell.

When visiting a house in person, use all your senses. Consider the general state of the house both inside and out, listen for noises, and take note of any foul smells. Inquire about structural components, such as the age and type of roof and the condition of the plumbing and electrical systems.

12. Don't Be Afraid to Negotiate

By asking the seller to pay for the cost of repairs in advance or negotiating a price reduction to cover these expenses, you might be able to save money on the house.

You could also request that the seller cover a portion of the closing costs. However, bear in mind that lenders could place a cap on how much of the closing fees the seller can cover.

Moreover, the local market will affect your ability to bargain. If there are more home buyers than available properties, it is more difficult to negotiate a favorable price. Learn about the local market with the help of your real estate agent and plan your approach accordingly.

13. Don't Forget Home Insurance

Prior to completing the purchase, your lender will ask you to obtain homeowners insurance. If an accident covered by the policy damages your property or possessions, home insurance will pay to restore or replace them.

Additionally, it offers liability insurance if you’re held accountable for a mishap or damage. You should also purchase adequate house insurance to pay for the expense of rebuilding the house in the event of a natural disaster.

If you need to protect your house, car, and other significant assets, it might be worthwhile to purchase an umbrella plan.

Final Thoughts

Buying your own home is one of the most important things you can do for your family. Real estate remains one of the most attractive investments, and if you are feeling intimidated by the cost of homes in Santa Fe, you’ll be happy to know that you can receive down payment assistance and closing cost assistance to help reduce your monthly payments.

When purchasing your home, keep these tips in mind to ensure that the process goes smoothly and that you have a favorable overall experience.

Frequently Asked Questions

1. What is down payment assistance?

One of the most-asked questions among first-time home buyers in Santa Fe is, “What is down payment assistance, and do I qualify?”. The down payment assistance program is designed for low to moderate-income families, and these state-run mortgage programs offer low fees and competitive interest rates.

2. Am I obligated to make a down payment for a Santa Fe home?

This will depend on the type of loan you are eligible for. While most home loans require a down payment, some, like the VA loan, do not. It’s best to check with your lender.

3. Should I hire an inspector for a home inspection before making an offer on a home?

Yes! We highly recommend hiring a licensed inspector to uncover potential issues that could cost a significant amount for repairs and maintenance later.