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Your Guide to Buying a Home in New Mexico

New Mexico Homebuying: The Purchase and Escrow Process

Review of The Purchase Process in New Mexico

  • New Mexico is an escrow state. This means oney will be deposited in escrow through the use of an escrow agent, a closing agent, or a title company. 
  • Money is held in an escrow account and not released until both the buyer and seller have completed their responsibilities. 
  • Once the responsibilities are complete, the escrow representative releases funds while the sales agent gives the property keys to the seller. 
  • Inspections will be completed. In New Mexico, certain inspections, such as termite inspections, are recommended. 
  • A typical sales contract for a New Mexico house will include a table of contents, which makes them easier to read. 

A Step-by-Step Review of the Home Purchase Process 

Phase 1: Disclosures, Inspections, and Negotiations in New Mexico

Once a buyer finds a house they like, they make an offer to purchase. If that offer is accepted, it will trigger a sales process that includes disclosures, inspections, and negotiations. 

  1. The buyer will make an offer and this offer will be accepted by the seller. This will kickstart the escrow process. 
  2. A deposit, known as “earnest money,” is made. This deposit demonstrates the buyer’s serious intention to purchase the home. 
  3. The seller will submit disclosures for the buyer to review. In New Mexico, a form known as a “Property Disclosure Statement” is provided. These disclosures outline specific flaws with the property, including potential environmental hazards. The disclosures may also include needed repairs and improvements.
  4. The buyer now has a chance to review and sign off on disclosures. 
  5. In desired, the buyer can now perform inspections. For New Mexico buying contracts, there will be a delivery deadline; all inspections must be completed before this deadline. 
  6. Common inspections in New Mexico include termite inspections and dry-rot inspections. 
  7. The buyer can then report the findings to the seller, which must be done before the “objection deadline.” 
  8. Depending on the results, buyers can walk away from the contract or negotiate with the seller to repair the problems. If an agreement is not reached by a certain deadline, the contract expires and the buyer can have their earnest money returned. 
  9. On some contracts, the seller will designate a maximum dollar amount for repairs. Essentially, they are saying that regardless of inspection results, they are only willing to go so far with repair costs.

Phase 2: The Mortgage

A vast majority of homebuyers will use a home loan to purchase their property. In New Mexico, the process typically looks like this: 

Before the Search: Pre-Qualification

Before shopping for homes and making offers, most buyers will have completed a mortgage pre-qualification or pre-approval. This not only establishes your budget, but also opens many purchase opportunities because sellers and seller agents prefer to work with buyers who have been pre-qualified. 

  1. Once a house is found and an offer is accepted, the buyer will submit an official loan application. This can be done independently, but it’s usually completed with the help of a lending agent or mortgage broker. 
  2. The lender will review the application and send a “good faith estimate.” This is the lender’s best estimate of closing costs, although it may vary from the final costs. (Usually, it varies only slightly.) 
  3. Now the buyer will have to submit a variety of financial documents to the lender. These documents can include almost anything that confirms your financial situation, including: 
  • Bank statements, dating back several months, for each account held by the borrower
  • Statements on outstanding debt, such as credit cards, car loans, and student loans
  • Tax returns for the past two years or more
  • Pay stubs or employment contract
  • Information on any financial obligations, including marriage licenses, divorces, child support, property liens, and judgements
  • Descriptions of credit inquiries
  • Information on large deposits that are not part of the borrower’s regular income. Specifically, the lender will want verification that a large one-time deposit is not a loan of some type. If a large cash gift has been given, the lender will likely request a “gift letter” that outlines the nature of the gift, the amount, and verifies it is not a loan.
  • Further information to support the provided documents. Essentially, a lender may request that you backup or verify your information with more documents.  

4. Assuming everything check out, the lender will now give preliminary approval of the loan. This simply states their willingness to finance the purchase as long as certain conditions are met. The conditions will likely include a statement that your financial situation not change. (No new jobs, car loans, etc.)

5. Conditions usually include a home appraisal. Appraisals, which confirm the value of the property, are important to lenders because these companies want to know that the house they are lending against is worth the investment. The agent or mortgage broker cannot request a specific appraiser, but they can reject an appointment and request a new appraiser. If the appraisal is low, the lender may pull their approval unless changes are made to the loan terms. (Such as a larger downpayment.) 

6. The buyer will need to have a loan commitment or communicate to the seller that they cannot secure financing. This final contingency will need to be removed by the seller within a certain date.

7. The lender will now submit a request for title commitment. At this point, a title company will examine the title and any findings, with the hope that the title is free and clear and can be sold without issue. Title insurance is usually arranged at this point

8. The buyer will now arrange for homeowner’s insurance and proof of this purchase must be delivered to the lender. 

9. Hazard insurance may also be requested. This can include flood insurance and special storm insurance for certain sections of New Mexico.

Phase 3: Finalizing the New Mexico Home Purchase

The process for finalizing a deal in New Mexico is usually fast, generally lasting a couple of days to a week. While some states require both the buyer and seller to be present during the closing, this is not the case in New Mexico. 

  1. First, the lender will send final loan documents to the escrow agent
  2. A final settlement date is scheduled
  3. A settlement will occur at the office of the escrow agent or closing agent. It could also be at the title company’s office
  4. The seller traditionally signs all documents first
  5. The buyer will then sign all closing documents, including the loan documents
  6. The buyer will now write a check for the remaining funds and closing. This check will be given to the escrow agent, closing agent, or the title company. To speed the process, this step can be completed in advance. 
  7. The deed, with a new owner, is recorded with the appropriate city or county
  8. The buyer is given the keys and can move into their new home!

Loan Limits in New Mexico

The maximum loan amounts for conforming loans in New Mexico are determined by the Federal Housing Finance Agency, which calculates limits on a county-by-county basis. Using a a formula that includes home prices in the county, these limits are used for a variety of loans, including loans supported by the federal government. 

The FHFA sets a base limit, which is the lowest maximum amount for a county. In high priced areas, however, this maximum amount can be increased. 

At the time of this article, the entire state of New Mexico falls under the base limits for the country. This means that for all single-family homes, from Hidalgo County in the far southwest corner to Union County, which borders Texas, Oklahoma, and Colorado, the max amount for a single-unit house in New Mexico is $548,250. 

The FHFA also sets limits for multi-unit housing. In New Mexico, the limit for a two-unit property is $702,000, while three-unit properties can use conforming loans up to $848,500. If you want to purchase a four-unit property, the maximum loan amount is $1,054,500. 

It should be noted that these amount are not guaranteed, as borrowers still need to qualify. Despite the determined limits, some borrowers will only qualify for lower amounts. Also, if you need more than the loan limits, there are plenty of options for New Mexico homebuyers, including jumbo loans. 

 

Downpayment Assistance Programs in New Mexico

Many people in the state of New Mexico struggle to save for a downpayment. Fortunately, there are statewide programs, as well as local options, that help people overcome this common homeownership barrier.

Statewide New Mexico DPA Programs

FirstDown
Offered through the New Mexico Mortgage Finance Authority, the FirstDown program helps buyers purchase a home by providing a second loan that can be used towards a downpayment. The program uses an extended repayment plan and comes with an affordable interest rate. Exclusively for first-time buyers, this program can bring up to $8,000 in downpayment support.

HomeWise
Intending to strengthen neighborhoods throughout New Mexico, HomeWise offers support that creates greater financial stability, largely through homeownership. One of their most impressive programs is a downpayment option that can provide as much as $40,000 toward a purchase. Their support can vary by income range, but you’ll largely find that this option is one of the most significant benefits for aspiring homeowners. HomeWise currently has offices in Albuquerque and Santa Fe.

Major Local DPA Programs in New Mexico

Santa Fe County’s Down Payment Assistance Program
If you are purchasing a home in Santa Fe County, you may be eligible for one of the largest downpayment options in the state. This program gives buyers access to as much as $20,000 in assistance. Support through this program comes as a zero percent, non-amortizing loan with a deferred payment.

Common Requirements for New Mexico Downpayment Assistance

The most common requirement for these programs is a restriction on overall income. Because these programs are intended for low-income buyers, as well as moderate earners, you usually need to be below a certain threshold. For example, the FirstDown program has different limits for each county. In most cases, the limits are around $70,000 to $90,000, but certain areas have higher limits. In Los Alamos County, for example, the limit is over $142,000.

There can also be limits on the purchase price. These limits, however, are high enough to purchase a top-quality home, with limits rarely dipping below $190,000.

Many programs will require that you are a first-time homebuyer. However, if you have not owned a home in the past three years you are probably still eligible for most DPA options.

Other requirements may include a credit score and a small contribution from your own funds. For example, the FirstHome and FirstDown programs require borrowers to have at least a 620 credit score; they also have to pitch in a minimum of $500 from personal savings.

Downpayment assistance is always changing. For up-to-date information on support in your area, contact our team today!

Note: This document is a general guide on the buying process in New Mexico and should not be taken as financial, legal, or real estate advice. Laws and processes are constantly changing, so speak with an expert for updated information.