8 Steps to Buying a House in New Mexico

Jamie Ayers

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Jamie Ayers

September 16th, 2022
Updated September 16th, 2022

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8 Steps to Buying a House in New Mexico

Save for down payment | Find a real estate agent | Get preapproved for a mortgage | Choose your neighborhood | Go house hunting | Make an offer | Inspections and appraisal | Final walkthrough and closing

Buying a house in New Mexico is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.

For example, homes in Albuquerque are hitting the market at $397,000 and selling within 35 days — 18 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.

The more you know about the home buying process and New Mexico's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.

No matter where you are in your home buying journey, Clever can connect you with local real estate pros who will help you purchase your New Mexico dream home!

The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!

» START: Buy with a top local agent, save thousands with Clever Cash Back

Step 1: Save for a down payment

🔑 Key takeaway:

Your down payment can be less than 20% of the purchase price — $59,562 for the typical home in New Mexico — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.

Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.

Typically, mortgage lenders in New Mexico want you to contribute 20% of the purchase price as a down payment. That would be $59,562 for a $297,808 home — the typical home value in New Mexico.

However, you have options to lower your down payment amount.

Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).

Mortgage type
Minimum down payment (%)
Down payment ($)
VA Loan
0%
$0
FHA Loan
3.5%
$10,423
Conventional
3%
$8,934
Based on typical home values from Zillow (August 2022)

But making a down payment of less than 20% comes with some risks.

First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.

Down payment
Monthly payment
Total interest
Total Cost
5%
$1,617
$299,217
$597,025
20%
$1,362
$251,973
$549,781
Based on home values from Zillow (August 2022) and a 5.56% interest rate for a 30-year loan.

Second, you may have to purchase mortgage insurance.

Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.

Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.

VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.

» READ MORE: Everything you need to know about low-income home loans

New Mexico down payment assistance programs

There are numerous down payment assistance (DPA) programs available to low-income and first-time homebuyers in New Mexico. Financial assistance may be available as a grant or second mortgage that can help with closing costs or a down payment.

Here are a few DPA programs in New Mexico that you might be eligible for:

MFA FirstDown Program

The New Mexico Mortgage Finance Authority (MFA) offers its FirstDown Program to first-time homebuyers with a FirstHome mortgage loan. The FirstDown Program can provide up to $8,000 as a second mortgage for any single-family property.

Eligible borrowers must have a credit score of at least 620, contribute a minimum of $500 from their own funds, and receive pre-purchasing counseling.

MFA HomeNow Program

The MFA HomeNow Program can be used in tandem with a FirstHome mortgage. First-time homebuyers can receive up to $8,000 or 8% of the home's purchase price in down payment assistance. The HomeNow Program accrues no interest and is forgiven after ten years.

Participants are required to contribute $500 towards the purchase of the home and have a credit score of at least 620.

MFA NextHome Program

The MFA NextHome Program is a combination of a first and second mortgage, with the second loan equal to 3% of the first mortgage. It's available to first-time and repeat homebuyers, requires no monthly payments, and may be forgiven under certain circumstances.

Minimum income limits and purchase price restrictions apply depending on which area the home is located. Eligible borrowers also need to have a credit score of at least 620 and contribute $500 towards the down payment.

U.S. Department of Housing and Urban Development

Additional DPA programs can be found on New Mexico's HUD page here.

Step 2: Find a great real estate agent in New Mexico

🔑 Key takeaway:

Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.

Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in New Mexico.

Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:

  • Years of experience
  • Number of transactions in the last year (the more the better!)
  • Experience in your price range
  • Overall review score
  • Individual reviews and complaints

Top Local Agents Hand-Picked for You!

Clever matches you with multiple agents in your area so you can interview, compare, and choose the best one to help you buy your next home.

Step 3: Get preapproved for a mortgage

🔑 Key takeaway:

Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.

Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:

  • Avoid opening new credit accounts
  • Don't close any accounts that have been open for a long time
  • Make all of your credit card payments on time

» LEARN MORE: What factors do mortgage lenders consider?

A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.

Most sellers in New Mexico will require preapproval before showing you their home.

You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your New Mexico home.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

Step 4: Choose the right location

🔑 Key takeaway:

Search for neighborhoods where:

  • Home prices are within your price range
  • Home values are on the rise
  • The local amenities support your lifestyle

Currently, the typical home value in New Mexico is $297,808, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!

Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.

To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Albuquerque:

Home value appreciation in Albuquerque

Neighborhood
2015
Current
Appreciation
Paradise Hills
$198,113
$352,933
43.9%
Nob Hill
$252,970
$376,569
32.8%
La Mesa
$117,478
$226,817
48.2%

Step 5: Start house hunting in New Mexico

🔑 Key takeaway:

House hunting in New Mexico can be a challenge, as listing prices continue to rise and inventory is thinning out. If you’re set on buying in the state, you may have to review your priorities and temper your expectations. When your agent shows you listings, take the time to consider them, even if they aren't exactly what you originally wanted. They may pleasantly surprise you with what’s available if you keep an open mind.

Searching for homes in New Mexico is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.

Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."

Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.

Look at current housing inventory

The timing of your house hunt in New Mexico can have a big impact on your number of options. For example, in New Mexico, May has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.

On the other hand, December gives you the fewest choices in New Mexico. Historically, there are 42.7% fewer homes for sale than during New Mexico's peak season.

Housing inventory in New Mexico by season

Season
New listings per month
Spring
2,744
Summer
2,892
Fall
2,372
Winter
2,062
Based on data from Realtor.com (August 2022)

Step 6: Make an offer

🔑 Key takeaway:

The limited inventory in New Mexico is leaving very few listings in the market at the end of each month. If you find a house that you like, put in a strong offer — your agent can help you come up with a competitive figure. That way, you can catch the seller’s interest, even if there’s fierce competition.

Once you find a New Mexico house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.

Currently, in New Mexico, homes stay on the market for 82 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.

Historically, New Mexico homes sell fastest in July, where the average property is only on the market for 68 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.

On the other hand, if you buy in February, you have a bit more time to search. Homes typically stay on the market 18 days longer than New Mexico's annual average.

Average time homes spend on market in New Mexico

Annual average
82 days
January
99 days
February
94 days
March
81 days
April
70 days
May
66 days
June
65 days
July
67 days
August
69 days
September
76 days
October
80 days
November
84 days
December
92 days
Based on data from Realtor.com (August 2022)

» LEARN MORE: What should an offer include?

👋 Next Steps: Talk to an expert!

If you're weighing your options for buying or selling a house, Clever can help!

Our fully-licensed concierge team is standing by to answer questions and provide free, objective advice on getting the best outcome with your sale or purchase.

Ready to get started?

Give us a call at 1-833-2-CLEVER or enter your info below. Our concierge team will be in touch shortly to help.

Remember, this service is 100% free and there’s never any obligation.

Step 7: Inspections and appraisals

Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.

🔑 Key takeaway:

  • Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
  • Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.

Home inspections in New Mexico

Having your New Mexico home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.

Your inspector should check out the following parts of the property:

  • Roof
  • Foundation
  • Electrical system
  • HVAC system
  • Plumbing

If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.

New Mexico-specific inspections

New Mexico law requires sellers to disclose known property issues to buyers, but it’s highly recommended to conduct more specialized tests for good measure. In addition to a general home inspection, consider getting these tests done before closing on a home:

  • Radon testing: Although it isn't required by law, it's strongly suggested to conduct a radon test annually. If the seller hasn't done a radon test in the past year, consider testing for this dangerous substance before purchasing a home. You can find a discount radon test kit from the New Mexico Environment Department here.
  • Termite inspection: Certain lenders may require you to have a pest inspection done, but it's a smart move even if you're not obligated to do so. Infestations can cause property damage and pose health hazards, so it's important to catch potential problems early.

Appraisals

Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.

» LEARN: 3 options for buyers after a low appraisal

Step 8: Close on your new home!

🔑 Key takeaway:

Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.

The closing process in New Mexico requires you to meet at the title company to complete your paperwork and settle your closing costs

On the closing date, you'll need to review and sign several legal documents to finalize your title transfer. Take your time to carefully read each page and ensure that all of the information is correct.

Just a few key documents you'll be asked to sign will include:

  • Your final loan application
  • The deed
  • The mortgage promissory note
  • The disclosure statements

After you finish the documentation, you'll need to pay closing costs. In most cases, you'll give the total amount you owe to the title company, and then they'll take care of distributing the funds to the correct parties.

Buyers can generally sort their closing costs into four separate categories:

  • Lender fees: Fees paid to your mortgage lender. Lender fees often cover the costs of preparing your loan, as well as the appraisal and survey fees.
  • Title and escrow charges: Fees that the title company charges for conducting the closing process, performing the title search, and providing title insurance.
  • Prepaid costs: Ongoing costs of homeownership that must be paid in advance. Most lenders require homeowners to pay for certain predictable expenses up front, such as property taxes and homeowners insurance.
  • Other closing costs: Miscellaneous expenses that can differ for every homebuyer. Natural disaster certification fees and real estate attorney fees are a few common extra costs.

Buyers in New Mexico typically pay 3–5% of the purchase price in closing costs. For a $297,800 home — the typical home value in New Mexico — that's between $8,934 and $14,890!

» LEARN MORE: Closing costs for buyers in New Mexico

Should you hire a real estate attorney?

In New Mexico it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.


Frequently asked questions

  1. Save for down payment
  2. Get pre-approved for a mortgage
  3. Choose your preferred New Mexico neighborhoods
  4. Partner with the right real estate agent in New Mexico
  5. Go house hunting
  6. Make a strong offer
  7. Inspections and appraisals
  8. Do a final walkthrough and close

Yes, the New Mexico Mortgage Finance Authority offers the FirstHome program for eligible first-time buyers. The program provides buyers with an affordable first mortgage, along with the option to apply for a down payment assistance program.

To qualify, you must meet the income and purchase price limits set for your county. If you're accepted, you'll also have to contribute at least $500 towards the down payment and complete pre-purchase homeowner counseling.

» READ: What are the top first-time homebuyer programs?

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