How to Buy a House in New Mexico: A Homebuyer’s Guide
Updated: February 28, 2024
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In New Mexico, the typical home value is $300K. This is almost a 15% increase from last year’s value. Even though the average home value in New Mexico has been increasing over the years, it’s still less than the national average of $365K.
MoneyGeek outlined the steps prospective homebuyers should take to purchase a home. Our goal is to arm consumers with the knowledge needed to avoid unnecessary debt. From identifying the cheapest places to buy a house in New Mexico to highlighting the importance of home inspections, our comprehensive guide will help you become a homeowner in no time.
Choose an Ideal Location
Location is one of the key factors impacting how much it costs to buy a house in New Mexico. For instance, the average home price in Mountainair is $125K, which is significantly cheaper than the typical home price in Taos of $422K. Choosing the best location in New Mexico to buy a house depends on a variety of criteria, including cost of living, access to amenities, neighborhood culture and a home's price.
Calculate Mortgage Rates
There are several mortgage types available, each with different rates and terms. Ultimately, your circumstances and borrower profile will determine which mortgage option is best for you.
It’s important to highlight that your income, credit history and debt-to-income ratio will affect the loan terms available to you, including the loan amount and interest rate. By comparing lenders for their borrower requirements and loan terms, you can find the best mortgage for your situation.
Prepare Down Payment Requirements
There are different minimum down payment requirements for various types of mortgages. While a minimum down payment of 20% is typical, some may require as little as 3.5%. Other mortgage types, like VA and USDA loans, require no down payment.
Get Pre-Approved for a Mortgage
Prior to purchasing a home in New Mexico, you should get pre-approved for a mortgage. Some sellers require a pre-approval letter from a lender in order for you to view their home because this indicates that you are a serious buyer.
Lenders will provide a letter that conditionally outlines the loan amount you’re eligible for. Pre-approval is different from prequalification, as the latter only indicates your eligibility for a loan.
Conduct a Home Inspection
A home inspection is an essential step in the purchasing process. An expert third-party home inspector gives you more information about the home's present state and whether repairs are required. A house inspection is typically paid for by the buyer of the property.
Close Your Mortgage Loan
After the home inspection and property appraisal, you can close your mortgage if you’re satisfied with the terms offered by your lender. It’s important to remember that closing fees apply to this stage of the homebuying process. However, down payment assistance programs in New Mexico might help with some of the closing fees for low-income homebuyers.
New Mexico Homebuying Details
When purchasing a home in New Mexico, there are state-specific considerations that must be made. For instance, certain areas of New Mexico are prone to flooding, damages from which aren’t covered by homeowners insurance. As a result, before approving your loan, your mortgage lender might insist that you purchase flood insurance.
The state provides potential homebuyers with options for conventional and government-backed mortgages. In New Mexico, there are several down payment assistance programs that may be able to aid those who need help paying closing costs or making a down payment.
There are various statewide and regional homeownership assistance programs in New Mexico, such as Habitat for Humanity and the Native American program. There are also city- and town-specific programs such as the HOME-ARP Program in Albuquerque and The Housing Trust programs in Santa Fe.
The minimum credit score requirement is 620 for New Mexico Mortgage Finance Authority (MFA) mortgage programs. Pre-purchase homebuyer counseling is a requirement for all buyers. The minimum cash contribution from the borrower must be $500.
The New Mexico Homeowner Assistance Fund (HAF) initiative will offer housing assistance to income-qualified households suffering from the COVID-19 health crisis financial hardship. To sustain housing and/or lower housing cost delinquency, these funds can cover up to $20,000 per year in insurance, taxes and mortgage payments for each household.
Frequently Asked Questions About Buying a Home in New Mexico
Purchasing a home in New Mexico is one of the biggest financial decisions most people will make. MoneyGeek answered some of the most frequently asked questions about the home buying process to help prospective homeowners make the best decision.
It's important to reflect on your current life situation prior to purchasing a home. Do you have a stable income to make monthly mortgage payments? Am I eligible for any homebuyer assistance programs? These are just two things you should consider before buying a house.
It costs less to buy a house in New Mexico than in most states, so it may be an attainable investment. However, being a homeowner requires a significant financial commitment, so it may not be for everyone. When you're emotionally and financially prepared, buying a property in New Mexico is often an excellent option.
This depends on your financial circumstances and goal. In comparison to the rest of the United States, home values are lower in New Mexico. This makes it easier for buyers to purchase a home, but it also means they’ll likely make a lower profit when it’s time to sell.
In general, you should have enough income and savings to make a 20% down payment and afford your monthly mortgage payments. Depending on where you choose to live, you might need more or less money, but this amount gives lenders a decent idea of what to expect.
The property tax rate varies by location in New Mexico. In general, the property tax rate in New Mexico is lower than in other states.
With an average home value of $97K, Tucumcari strikes a fair balance between low cost of living and low average property value.
sources
- New Mexico Mortgage Finance Authority. "Homeowner Assistance Fund Programs." Accessed October 24, 2022.
- New Mexico Mortgage Finance Authority. "Homebuyers Mortgage Programs." Accessed October 24, 2022.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance: New Mexico." Accessed October 24, 2022.
- Zillow. "New Mexico Home Values." Accessed October 24, 2022.