Those who choose to buy real estate in New Mexico have several different mortgage options. Mortgages are regulated by statutes and federal laws. This southwestern state has an average of 16 people per square mile, making it one of the most sparsely populated states in the U.S. The Navajo and Pueblo Native American tribes have inhabited the land for centuries and their rich culture continues to positively influence the state today, along with Hispanic and Mexican cultures. This is a very diverse state that is rich in real estate, jobs and culture. Some advantages of living in New Mexico are that loan rates are affordable, home values are lower than usual and real estate taxes are low in every part of the state consistently. This article will focus on the real estate and mortgage facts about New Mexico, delving more deeply into the subject of mortgage types.
Real Estate Prices
When considering real estate prices in relation to home values, it is important to keep in mind that not all properties are priced at what they are valued in New Mexico. Most of them are, but sellers who bought their home at a higher interest rate and do not want to take a loss selling may still ask a higher price. It is best to purchase a home at or very close to its value. There are several things to keep in mind about real estate prices in New Mexico.
- Median Home Values – this is the average value of houses and condos, taken on a national, state or city average.
- Market Action Index – also referred to as “MAI” in real estate. This is the figure that determines whether the market is considered a buyer’s market or a seller’s market.
- Average Days on the Market – this is the number that shows how many total days a house is on the market, on average.
- Homes For Sale – this is the number of homes in a certain city, state or county that are currently for sale.
- Average Price Per Square Foot – this number determines the dollar value of each square foot of the property. For example, the current PPSF in Albuquerque is $115.
The nation’s average home value is about $177,000. To put this into perspective, the following most popular cities in New Mexico will be listed, along with their median home value. Keep in mind that these numbers vary greatly from one city to the next, so it is difficult to gauge how much a home will cost based on an average price derived from the entire state.
- Albuquerque – $205,629
- Las Cruces – $212,487
- Taos – $259,700
- Santa Fe – $496,665
Most Popular New Mexico Cities To Live In
It is true that Santa Fe is the capital city and has plenty of its own attractions for different groups of people, but overall it is one of the most expensive cities to live in, making it not fall in the popular category. The cost of living in comparison with the real estate values are not optimal, as they are in some of the other cities. The following paragraphs include some of the most popular and fairly-priced cities to live in, as well as a few of their features.
Las Cruces
Its name means “city of the crosses” and it is the heart of the Mesilla Valley. This valley is the agricultural hub of New Mexico. The population is estimated to be about 75,000. The advantages of living in Las Cruces are:
- MAI reflects a buyer’s market.
- Median home values are commensurate with average wages.
- Plenty of job and growth opportunity, due to agricultural influence.
- There are elementary schools, high schools, two-year colleges and four-year colleges.
Alamogordo
The population of this city is estimated to be about 35,000. It is located in south-central New Mexico. One of the unique defining features of this area is the White Sands, which are white gypsum dunes located close to the town. Following are some of the advantages of living in Alamogordo:
- Median home values are $142,900, lower than the national average.
- The cost of living is not any higher than it is in the cities, meaning consumers are able to save more money.
- The city’s industry is reliant upon tourism, which remains fairly steady; most jobs are in service, retail and tourism.
- Plenty of educational institutions, including elementary, high school and college.
Rio Rancho
This city is rated as one of the best small cities to live in the U.S in 2010 by Money Magazine. Ten years prior to this review, the city’s population was 51,765. Today it is estimated to be 84,000. There are several advantages to living in Rio Rancho, which is the fastest growing city in New Mexico. They include:
- Median home prices are $139,950.
- Intel Corporation provides steady, secure and long-term jobs to most of the population; the remainder work in service, production, professional and government positions.
- The city continues to grow rapidly. As a result, home values are expected to increase, making real estate purchases a wise investment.
- There are ample public schools for elementary and high school students.
Types Of Mortgages Available In New Mexico
New Mexico has several types of mortgages that are offered to real estate buyers. One unique issue that New Mexico has with its mortgage laws is that mortgage contracts are used to determine the terms of the loan as a mortgage instrument, unless the buyers expressly chooses a deed of trust to be set into effect. New Mexico has state laws that regulate home loans and classify them as either being a deed of trust or a mortgage. The state’s judicial system has not concluded an official agreement of one regulation, deeds of trust can be treated with laws specific to that type of instrument, while mortgages may be treated with mortgage laws, which are somewhat different in several areas. While not a common issue, this subject does arise, so it is important to study the laws of both instruments before deciding which type to use.
Adjustable Rate Mortgage
This type of mortgage features an interest rate that is adjusted periodically. They are defined by index and charge limitations called “caps.” ARMs are usually much shorter in duration than a fixed rate mortgage. Some of the most important and main features that comprise this type of mortgage are:
- The initial interest rate at the beginning of the mortgage is lower than other options.
- There is an adjustment period after the initial period, in which the rate and period remain unchanged. After this period is over, the rate is recalculated and adjusted.
- The index rate is the rate which is used to determine the adjustment of the ARM, usually based on a specific time period in years on Treasury securities or national and regional average costs of funding to loan associations.
- There is a margin that is points-based, which lenders use to calculate the ARM interest rate.
- Sometimes initial discounts or special reduced rates are offered at the beginning of the term to entice buyers.
- In some cases, the ARM will have the option of conversion. This means that the lender will offer the buyer the chance to convert to a fixed rate at certain times.
- Many ARMs have a prepayment clause, in which buyers must pay a penalty fee if the mortgage is paid off early.
Fixed Rate Mortgage
This is the type of mortgage that most home buyers choose because it is the most reliable and provides peace of mind. There are disadvantages and advantages, each depend on the buyer’s personal circumstances and budget. The following are defining features of fixed rate mortgages:
- They are not tied to an index, unlike ARMs.
- Each month or quarter, the payment is the same.
- Interest rates remain the same as the initial rate at the time of signing.
- Monthly payments are usually lower because of the longer life of the loan, usually between 15-30 years.
Jumbo And Balloon Loans
These loans are not usually chosen by buyers, even if they are offered. The features of the loan make it risky to the lender and buyer both. This loan is defined by:
- Initial and monthly payments are low, calculated similar to a 30-year mortgage and amortized.
- The life of the loan is shorter than a fixed rate mortgage, usually less than 10 years in length.
- At the end of the loan, the large remaining balance must be paid in one lump sum, called a balloon or jumbo payment.
- The amount of the balloon payment must be defined in the document as part of the Truth In Lending Act.
- If the buyer is unable to pay the full balloon amount when the loan matures, they may be offered a “two-step” or “reset” option by the lender. This means they will have the chance to refinance the balloon payment into more affordable monthly payments or two lump sums.
Veteran’s Administration Loans
Military veterans may use VA loans in the state of New Mexico. These loans are defined by the following features:
- VA loans give veterans full home value or 102.15% financing, whichever is larger, without privatized mortgage insurance. Second mortgages are allowed 20% and a maximum of $6,000 for improvements related to energy efficiency.
- A 0%-3.15% financing fee must be paid to the VA or it may be financed.
- Allows for larger loan amounts with smaller payments.
- Qualification criteria are far more generous than many organizational loan companies, such as Fannie Mae.
- Monthly payment may not exceed 41% of gross monthly income.
- A maximum of $417,000 may be borrowed with no down payment to qualified veterans.
- Seller may pay the closing costs if they do not exceed 6% of the home’s sale price.
Additional Foreclosure And Recourse Information
New Mexico is a state that uses recourse loans. This is advantageous to the lender, but not the buyer. In a recourse loan, the lender is allowed to seize the buyer’s personal assets to meet the full financial obligation, should the buyer default. Following are the important points concerning foreclosure in New Mexico:
- The lender must file a petition in judicial court in order to begin the process of foreclosure.
- Public notice is then published that the property is being foreclosed.
- The buyer in default is formally notified that the foreclosure process has begun.
- The entire foreclosure process takes about 120-180 days to complete.
- The borrower in default is allowed to contest the foreclosure and the lender must give the buyer a chance to redeem the property by paying off the loan balance, court fees and legal costs.
- Buyers have between 30-270 days to complete redemption of the property, if so desired. Most cases are set on a 90-day period, after which the process continues and is finalized.
- After a petition is awarded to the lender, they may then auction off the property.
- Auction homes in New Mexico must be sold for at least 80% of the home’s market value by law. If 80% is the maximum winning bid, the buyer must pay any additional amount owed, if applicable; this may include seizure of personal assets.