by Edward Baswell, Home Authority Real Estate

Earlier this week I had a business lunch at Thai Spice (highly recommend the Panang Curry with seafood…hot!) with Karrie and Jesse Moorhouse of Paradise Mortgage and Investments, LLC. Karrie and Jesse are a mother and son team; President/Senior Loan Officer and VP of Sales, respectively.

As we were chatting, Karrie said something that really struck a chord with me, and it became the inspiration for this week’s article. She said, (paraphrasing), “It’s surprising how many people still think they need 20% down to buy a home.” If you are one of those people, please keep reading!

The average home price in Albuquerque as of January 2023 was $334,000, so 20% would be a $66,800 down payment. Not a lot of people have access to that kind of cash. But the thing is…you don’t need access to that kind of cash! The 20% down rule is a myth!

Then why is the “20% down” term thrown around so much in the real estate world? Well, lenders would prefer you have 20% down on a conventional loan because it lowers their risk. Also, when lenders loan 80% or less of a home’s value, they won’t charge a monthly premium for PMI, or Private Mortgage Insurance, which can potentially add a few hundred dollars per month to your mortgage payment. However, there might be ways to avoid paying PMI with less than 20% down, or to at least lower the cost of the premiums. Consult with lending experts (like Karrie and Jesse) to learn more about your options.

Popular Loan Products for New Mexico Home Buyers

VA (Veterans Administration) Loan

A VA loan allows military members, veterans and eligible surviving spouses to finance a home with no down payment, no mortgage insurance and lenient credit requirements. Available to Active Duty, Reserves & National Guard, Unmarried Surviving Spouse, and Honorably Discharged Veterans.

FHA (Federal Housing Authority) Loan (Basic Home Mortgage 203(b))

The FHA loan is the most popular government-backed home loan in the country. It’s ideal for first-time homebuyers because its down payment requirements are as low as 3.5%, and its interest rates and credit criteria may be lower than with conventional mortgages.

Fannie Mae HomeStyle

The Fannie Mae® HomeStyle® program allows you to purchase or refinance a home and bundle renovations, repairs, and even upgrades in the same loan.

Fannie Mae HomeReady

The Fannie Mae® HomeReady® program is designed to make home ownership more affordable with flexible income sources and low down payment.

USDA Rural Development

Assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.

Conventional Mortgage

A conventional loan is a mortgage loan that’s not backed by a government agency. These loans come in all shapes and sizes, and while they don’t provide some of the benefits as FHA, VA and USDA loans, conventional loans remain the most common type of mortgage loan.

Don’t Feel Left Out

There are A LOT of options out there for people ready to switch from paying the landlord to owning their own home. Reach out to me and let’s talk about those options. Even if the math doesn’t work out for you today, we can look at ways to get you on a path to home ownership in the future!

A Personal Story…

Early in 2012, I had gone through a divorce and had to short-sell a house I had bought in 2007, just before the big, sub-prime mortgage market crash in 2008. If you’re not familiar with the term, a “short sale” is when you have to sell you home for less than you owe.

By summer of 2012, my credit score was in the low 500’s (that’s bad…really bad), and I was thousands of dollars in debt.

Fortunately, I still had a job with a good salary. I spent the next three years living well below my means so I could do two things: Number one, pay off my debt. Number two, build my savings.

By April of 2015, I was able to (barely) qualify again for a VA Loan and I bought a home. Even though it would be several more years before I completely paid off my debts and got my credit score back into the “Excellent” range, at least now I was building equity in my own home.

The moral of my story is that even if you think “Oh, my credit it too bad,” or “I don’t have any savings,” that’s fine. We’ve all been there. But know that you can find a path to better credit and a bigger savings account, and I am happy to help you try and find that path.

Thanks for reading!