Buying a house in New Mexico: A how-to
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If you’ve been thinking about buying a house in New Mexico, you’ve likely been watching the cost of homes rise over the past two years with a big question on your mind: Should you try to buy now or wait it out? If you’ve been holding off, now might be a good time to enter the market.
While it’s still getting more expensive to buy here — the median sale price increased by $25,000 to just under $310,000 from July 2021 to July 2022, according to the New Mexico Association of Realtors — buying doesn’t feel so rushed now. Homes were sitting on the market for an average of 44 days in July, an increase of 10 extra days versus the year before. If you’re comfortable locking in at New Mexico’s current mortgage rates, you can take advantage of a cooling market that is slowly shifting some of the power back into the buyer’s hands in the state’s most competitive cities, like Albuquerque. Read on for a complete rundown of all the steps you need to take to buy a house in New Mexico.
How to buy a house in New Mexico
Decide where to live in New Mexico
As you think about where you want to call home in New Mexico, keep in mind that housing prices look very different depending on where you’re trying to buy. If you’re looking in the Albuquerque area, Bernalillo County median home prices sat at $315,000 at the midway point of 2022. Head south to the edge of the Chihuahuan Desert, and you’ll find more affordable living in Las Cruces’s Doña Ana County, where median prices were just over $281,000. And if you want to immerse yourself in the magical creative-arts scene of Santa Fe, you’ll need to bring a sizable bank account. Median sale prices in the city climbed to more than $583,000 in the second quarter of 2022, according to the Santa Fe Association of Realtors.
In addition to comparing the price tags attached to houses, be sure to think about the price of everything else. Bankrate’s cost of living calculator is a good reference point to help you understand how different places will impact your overall budget for groceries, transportation, utilities and other essentials. For example, the cost of living in Las Cruces is more than 3 percent lower than it is in Albuquerque — certainly something to consider in this age of high inflation.
When you’re thinking about buying a home, you need to consider the future, too. Will you be starting a family? Will you want to switch jobs? Be sure to consider the local school system and employment opportunities. It doesn’t have to be your forever home, but pick a place where you can feel comfortable living for at least five years to justify all the one-time closing costs you will need to pay.
Tips for buying a house in New Mexico
As you compare home prices in different parts of the state, it’s important to determine what kind of mortgage you’ll need: conventional, jumbo or FHA. In New Mexico, this is fairly simple. If the loan amount exceeds $647,200, the conforming loan limit in every county in the state in 2022, you will need to compare options for jumbo loans. There is one nuance to FHA loan limits: While $420,680 is the limit for FHA borrowers in most counties, there is one exception: It’s a higher $530,150 in Los Alamos County.
Things to know about buying a house in New Mexico
- Property taxes: Don’t forget to budget for your annual property tax bill. The good news is that property taxes are very low in New Mexico. According to the Tax Foundation, the typical bill is just $884 each year, which is the sixth-lowest in the country.
- Dual agency: Dual agency is legal in New Mexico, which means that your real estate agent might represent both you and the seller. There can be an inherent conflict of interest in this situation, so you’ll need to give your written consent if you’re OK with it.
- Seller’s disclosure: New Mexico home sellers must give you a completed Adverse Material Facts Disclosure Statement, which will include knowledge of any defects that impact the desirability of the property. This is helpful, but it should not replace a professional home inspection.
- Closing costs: In 2021, the average closing costs on a New Mexico home added up to $3,513, according to data from ClosingCorp. It’s important to note that this figure does not include fees charged by lenders, so you’ll want to make sure to compare terms to find a lender with low-cost (or no-cost) origination fees.
- Attorneys: You are not required to hire a real estate attorney when buying a home in New Mexico. However, it’s smart to enlist the services of one anyway. Buying a home is likely the biggest investment of your life, so paying a small additional sum of money for a professional legal OK is worth it.
- Climate and weather considerations: New Mexico’s dry climate translates to significant wildfire risks. In fact, studies have shown that approximately 70 percent of residents live in areas with elevated potential for wildfire damage, so you may need to explore additional insurance coverage to protect your property.
How much house can I afford in New Mexico?
Before you start to move forward with trying to find a place to move, ask yourself this very important question: Are you actually ready to buy a house in New Mexico? If your credit is in good shape — a minimum of 620, but a score of 740 will likely qualify you for a much lower interest rate — you’ve checked off the first item on the list. Then, it’s time to think about what’s next for you and your family. Buying a home comes with quite a few closing costs, including escrow fees, lender fees, attorney fees and more. You want to be able to see yourself in the home for a while, otherwise, those one-time expenses aren’t really worth it.
If you’re ready to move forward, do the math to figure out what you can comfortably afford to spend. Bankrate’s new-home calculator will look at your entire financial picture to help you set a maximum amount for your monthly mortgage payment.
Saving for a down payment in New Mexico
In the spring of 2022, the median down payment on a new house in New Mexico was $23,399. However, if you’re a first-time homebuyer, you likely aren’t sitting on tens of thousands of dollars extra. You don’t need to feel overwhelmed as you start saving for a down payment: Bankrate’s down payment calculator can help you crunch the numbers.
You will also find some helpful assistance options from the New Mexico Mortgage Finance Authority (MFA). The First Down program can help eligible borrowers get a second mortgage worth up to $8,000 to cover down payment and closing costs. The agency’s Home Now program aims to help low-income buyers afford to stop renting with a notable benefit: The loan is forgiven if you remain in the home for 10 years. All of the agency’s programs require a minimum credit score of 620 and a minimum contribution of $500 from your own money.
Get preapproved for a mortgage
Before you start house-hunting in earnest, you’ll want to take an important step: Get preapproved for a mortgage. The process involves handing over a range of documents about your personal finances — pay stubs, tax returns, bank statements, etc. A lender will analyze all that info, along with your credit history, to determine how much money they are likely to let you borrow. Then, they will issue a preapproval letter that you can share with sellers to demonstrate your credibility as a buyer.
Find the right lender
Even after you get preapproved, you still have find a lender to officially approve your loan. You can go with the same company that preapproved you, but you don’t have to. Look at a few different lenders licensed in New Mexico to get a sense of who can offer you an ideal balance of competitive interest rates, low fees and a fast closing timeline. If you already live in New Mexico, it’s wise to ask the place where you manage your money — a local credit union or community bank — if they offer any exclusive discounts for existing customers.
Find the best local real estate agent in New Mexico
Having a knowledgeable local real estate agent by your side will help you navigate the complexities of a competitive market. A Realtor will listen to what you’re looking for in a new home, find listings that check all (or most) of your boxes, schedule showings for you and more. And if you’re buying a home from out of state, look for the letters CRP after a Realtor’s name. The acronym stands for Certified Relocation Professional, and it means an agent has been trained in helping clients who are looking for a fresh start in a new, and possibly faraway, place.
Start house hunting and make an offer
Now, it’s time for the fun part: Shopping for a place that feels like home. Are you looking for a single-family home with a yard? Or might a condo with no landscaping duties be a better fit for your lifestyle? In Santa Fe, the smaller space can make a massive difference for your budget: Condos and townhomes were more than $155,000 cheaper than standalone single-family homes in the second quarter of 2022. When you find a place that feels like a perfect fit, your agent can help you craft a compelling offer to bring the seller to the negotiating table.
Home inspection and appraisal
Once your offer is accepted, it’s still not quite time to celebrate. You’ll want to get a home inspection to make sure the property has no major problems, like a leaking roof or a cracking foundation. In addition to an inspection, your lender will require an professional appraiser to assess the value of the home. This ensures they’re not lending you more than the house is worth; if there’s a gap between the appraisal price and the price you’ve agreed to pay, you’ll have to make up the difference.
Final walk-through and closing on your New Mexico home
You’re almost at the finish line! But before you cross it, you need to take another look at the home. Schedule a final walk-through to make sure that the property is in the condition you’ve been promised and that any issues identified during your home inspection have been resolved. Use this checklist as a guide.
If everything looks good, your next step is the closing table. Be prepared to pay all closing costs — likely via a certified or cashier’s check or a wire transfer — and do some hand exercises before you arrive. You’re going to sign your name on a lot of documents. Then, it’s time to smile and relax. You are a new homeowner in the Land of Enchantment.
Now is not an easy time to buy a house in most parts of New Mexico. At the beginning of 2022, the median sale price across the state was just over $292,000, according to the New Mexico Association of Realtors. By July, that figure had increased to $305,000. In addition to dealing with rising housing prices, you’ll have to navigate rising mortgage rates. There are, however, some signals that the market is becoming a bit more buyer-friendly. Redfin data shows an increase in the number of sellers who have needed to drop their prices, and fewer homes have been selling for more than their asking price in recent months.
Lenders in any state typically want to see a minimum credit score of 620 for borrowers applying for conventional loans. But you’re likely to get the best terms available with a higher score of 740 or above. If your credit is not great, your best bet is to search out an FHA loan. In some cases, FHA lenders will be willing to consider an applicant with a credit score as low as 500 — but you’ll need to make up for it with a down payment of at least 10 percent.
That depends on where in New Mexico you’re looking to buy. Vacation destinations like Taos can be a good long-term investment — the ability to rent out your property to tourists is always helpful. But the state’s population growth forecast is not very promising compared with neighbors like Texas and Arizona that have been attracting loads of newcomers. If estimates from a recent study at the University of New Mexico are correct, the state will not grow much over the next decade, which may spell trouble if and when you decide to sell your property.