Buying Your First Home

If you've been considering a first-home purchase, and you're feeling pressure to ACT NOW because the $8,000 tax credit is expiring in November, how do you know if ACTING NOW is the right thing to do? When you're talking about Ruidoso, NM, you're talking about a special set of conditions, so you can't apply New York wisdom here. Here are some questions to ask yourself when you're considering a first-home purchase in the Ruidoso area.

Can you get the loan?
Many people hesitate to even check their credit score because they fear the horror. But you need to bite the bullet and take a peek; it might not be as bad as you think. You really should review your credit reports (it's free once a year at http://www.annualcreditreport.com/, no strings attached). If there is anything ugly there, attack it, exterminate it. If your score is merely mediocre, don't sweat it. Just get your financial info together (pay stubs, W-2's and tax returns for two years, bank statements, etc.) Call a mortgage broker or try a company like Quicken Loans (that's the company I used and they were awesome). Find out for real if you can get an FHA loan. This is the best loan for first-timers without much cash on hand. You only need a mediocre credit score, a reasonable debt ratio and a steady income. The mortgage broker will tell you how much money you can borrow. Talk to a Realtor you trust to determine how much house you can buy. (There IS a difference.)

Do you have the money?
FHA loans require a minimum down payment of 3% -- that's only $6,000 for a $200,000 house. That's just the beginning of your costs, though, so don't think you can get it done with just 6 or 7 grand. After all the loan fees and closing costs, the actual upfront cost of buying a home can be twice the amount of the down payment, easy. So if your cash is tight, look for a little more help. Check out the programs offered by the New Mexico Mortgage Finance Authority. They offer all kinds of down payment assistance, mostly in the form of grants or loans that automatically are forgiven after a certain number of years. They even offer a program that lets you borrow against that $8,000 tax credit, so you can put that money towards down payment or closing costs, if need be. However, don't use that loan if you don't have to. You're going to get that money no matter what, and it can really come in handy for the costs of new homeownership, for they can be mighty. Talk to your mortgage broker and your Realtor about ways to save on your closing costs; i.e. sellers are often willing to pay some of the buyer's closing costs. The USDA also offers loans and loan guarantees in Lincoln County; click here to check your eligibility.

Do you have the earning power?
Perhaps the iffy-est thing in today's economy is job security. The Ruidoso job market is mostly restaurant, lodging and retail. The economy is driven by tourism, which is as fickle as the weather. Even in the high-paying professional sector, people have moved here and bought a house because they had a great new job, only to be burned. Things happened, and when the wind changed, that great job was extinguished and they were left holding the mortgage bill. It's a risk you should be aware of, even though there isn't a thing you can do to make sure your job will be there tomorrow. Best you can do is be prepared to tighten your budget and take whatever job is available until the wind changes again (and it will). Ideally, you could mitigate this risk with your savings and by buying equity in your home with a large down payment. If your financial situation is less than ideal, though, you can still take a shot at improving your future by buying a home.

What are your intentions?
If you don't intend to own this house for at least 5-10 years, maybe you should rethink the idea of buying. Even if you don't plan to live here that long (but you don't want to rent), you should plan to own the house for at least 5-10 years. One of the benefits of buying in Ruidoso is that if your situation changes and you leave town, you don't necessarily have to sell your house. The rental market is pretty good (remember: every renter is paying a landlord's mortgage), and the nightly rental business can actually take you past break-even and into the profit zone. So it's pretty easy to make a long-term commitment to the right property. The other benefit of buying in Ruidoso is that even when the market is "down," it's not really down; it's just dormant, sitting in a doldrum, waiting for the wind to change. That's how it is right now; take advantage of it, buyer.