How to Get a Mortgage in New Mexico

Step 1: Start Saving for a Down Payment

A down payment is the portion of your home’s purchase price that you pay at closing. Depending on what type of loan you qualify for, your down payment might range anywhere from 3% to 20%. 

Relying on how expensive the home you’re purchasing is, your down payment could be anywhere from a few thousand dollars to well over $60,000. It’s best to show up to the homebuying arena with some money already saved up.

Should you need help with saving or making a down payment in New Mexico, there are some assistance programs that can help you. Some are catered toward first-time buyers, and some help low-income buyers. Each program has its own eligibility requirements, so make sure you qualify before applying. 

New Mexico down payment assistance programs include:

• Mortgage Finance Authority (MFA) FirstDown: The MFA offers its FirstDown program to eligible applicants who also partake in Housing New Mexico’s FirstHome program. FirstDown offers a fixed-rate, second mortgage through an MFA-approved lender that borrowers can apply toward their down payments and closing costs. To see if you qualify for both of these programs, visit the MFA Loan Programs page on Housing New Mexico’s website.
• Mortgage Finance Authority (MFA) HomeNow: Available through MFA-approved lenders, the HomeNow program can provide eligible applicants with down payment assistance. Those already approved for the MFA FirstHome program may also receive up to 8% of their home’s purchase price for assistance — up to a maximum of $8,000. For more information on this program, visit the MFA Loan Programs page on Housing New Mexico’s website.
• Mortgage Finance Authority (MFA) NextHome: With this program, homebuyers in New Mexico with low to moderate incomes can receive a first mortgage loan in addition to a second loan for down payment assistance. Eligible applicants can obtain 3% of the first loan’s amount to be used for down payment and closing cost assistance. The NextHome section of Housing New Mexico’s website has full details on this program.
• US Department of Housing and Urban Development (HUD): New Mexico also has homeownership assistance programs through HUD. These include statewide programs, such as USDA Rural Development programs, to help reduce costs for low-income families. Local programs also exist, depending on the area of New Mexico in which you want to purchase a home. For more information, visit the New Mexico HUD Homeownership Assistance page.

Step 2: Know What Mortgage Lenders Look For

Before seeking out a lender, you should know what they will be looking for in regards to giving you a home loan. This will help you better prepare and show up with everything in order, making securing your loan even easier.

Some of the factors lenders will look at are:

• Income and job history: Lenders need to know you have a steady income that can ensure you’ll be able to pay back your loan. Often your lender will need to view at least two years worth of employment history and any other sources of income (alimony, child support, etc.).
• Credit score: Your credit score is an indication of how you manage your money. Most conventional loans require a minimum score of 620. With government-backed loans, you’ll need a score of at least 580.
• Debt-to-income (DTI) ratio: This helps lenders assess if you have the consistent cash flow to support a home loan. DTI is calculated by taking your monthly debt payments (credit cards, student loans, etc.) and dividing this by your gross monthly income. Lenders are aiming for you to have a DTI of 50% or less.
• Assets: Lenders will want to know if you have any extra money in a financial institution to ensure you can still make payments if you run into monetary trouble. Some examples of asset types are savings accounts, retirement accounts, and taxable investments.
• Property type: What kind of home you’re looking to purchase will also factor into what type of loan a lender will consider for you. Single-family homes that will be used as primary residences will take priority over investment properties that come with more risk. 

Step 3: Get Your Paperwork in Order

There’s quite a bit of paperwork you’ll need to gather when applying for a loan. We’ve listed it here so you can show up prepared. 

Step 4: Apply for Mortgage Pre-Approval

Most sellers in New Mexico will require pre-approval before showing you their home. To get pre-approved for a mortgage, all you need to do is fill out an application and provide some financial details. 

From there, you’ll get a peek at your mortgage pre-approval amount and can receive a pre-approval letter. A pre-approval letter lets sellers know you are financially able to make an offer on their home.

Factors that determine your pre-approval amount:

• Total Income: You want to aim for your monthly housing costs to be under 30% of your total monthly income. This lets lenders know you earn enough to make consistent mortgage payments.
• Personal Debt: We mentioned needing to calculate your DTI earlier. If you don’t already have that number, lenders will consider your credit card, student loan, and other types of debt and divide it by your total income to measure this.
• Cash Reserves: Again, this falls under the category of assets and accounts. Lenders will want to know you have enough money in the bank to cover the down payment and closing costs without going broke.

Step 5: Find Your Real Estate Agent

Having a real estate agent will make navigating the process of purchasing a home in New Mexico a whole lot easier. Your agent will help you make offers, review contracts, and negotiate the closing process. They will also connect you to inspectors and other necessary services for purchasing a home.

The right type of real estate agent can make all the difference, which is why we recommend homebuyers in New Mexico use Giniel Financial Group. Not only will Giniel provide brokerage and underwriting services, they also work directly with local realtors. This means you won’t have to search for a loan and then search for a real estate agent. You can get everything you need in one place, from start to finish.

However, should you find yourself on the hunt for a realtor outside of Giniel Financial Group, be sure to know what to look for. Things to consider include years of experience, what sort of reviews they have, the number of transactions in the past year, and if they have experience working in your price range.

Be sure to ask your agent questions about your desired neighborhoods and what their strategy is for helping you find and close on a home. Most importantly, make sure you feel comfortable with them — this process is going to most likely take a while, and you want a good working relationship.

Step 6: Find Your Home and Make an Offer

This is another area where your real estate agent will come in handy. Let them know what area you’d like to live in, and they can help you view properties and get a feel for the neighborhood. 

Some useful tips to keep in mind when house hunting is to prioritize what you need to have over what you want to have. This way, your realtor can help you better find a house that fits your budget and your desired location. 

Homebuying also fluctuates with the seasons. Typically, more homes are sold during the summer than during the winter. Searching during a time when more homes are on the market will give you a better range of options.

Once you find the home that’s best for you, your realtor will help you submit an offer. From here, you can begin the negotiation process with the seller. Your real estate agent will also help you navigate some of the trickier processes like seller concession, repair credits, and inspection contingencies. 

Should you feel like you want to add a personal touch, you can include a letter to the seller. This will let them know that you will be a wonderful caretaker of the property and encourage them to work with you throughout this process.

Step 7: Complete Inspections and Appraisals

Once your offer on a home has been accepted, it's time to take a closer look at what you're buying. You'll want to make sure that the house is in good condition and worth the money you are investing in it. This part of the homebuying process allows you to evaluate the condition of the property before officially purchasing it, which can sometimes lead to renegotiating your contract with the seller. 

Inspections

The inspection is an essential part of this process, as it allows a licensed professional to come in and check the roof, foundation, electrical system, HVAC system, and plumbing of the home. In New Mexico, septic inspections are usually done separately.

Although it is not mandatory in the state of New Mexico, buyers are encouraged to consider investing in some more specific inspections. This could include radon testing, termite inspection, or anything else that might prevent problems from occurring in the future.

Appraisals

Your lender will need to hire an appraiser to assess the value of the home and make sure it's worth the money you're borrowing. If the appraisal comes back lower than expected, you may need to either pay a larger down payment or renegotiate the purchase price. In most cases, however, the appraisal will be in line with your expectations. Don't be afraid to reach out to the appraiser and ask questions if necessary.

Recommended: Use a local lending service like Giniel Financial to make the appraisal process easier to navigate.

Step 8: Close on Your New Home

Once all inspections and appraisals have been completed, you will receive a Closing Disclosure that outlines your loan terms and closing costs. This includes the amount of your monthly payment, down payment, interest rate, and any other associated expenses. Once your lender approves your financing, you are officially ready for closing.

In New Mexico, the closing process is handled by a title company and requires you to sign several documents including the mortgage note, deed, and disclosure statements. Additionally, you will need to settle your closing costs which are broken down into four different categories:

1. Lender fees: This covers the cost of originating and underwriting your loan.
2. Title and escrow charges: Pays the title company for their services, and includes the title search, title insurance, and closing.
3. Prepaid costs: Includes homeowners insurance, property taxes, and other ongoing costs of homeownership.
4. Other closing costs: Catch-all for any other associated fees that vary from buyer to buyer such as pest inspection fees, real estate attorney expenses, or more specialized inspections.

Once all documents have been signed and closing costs have been paid, you're officially a homeowner! Congratulations! Enjoy living in your new home - and make sure to keep copies of all of your documents for tax and future reference.