Six Steps to Savvy Homebuying

Step 1: Become Educated

Taking a Housing New Mexico-approved homebuyer education course is the best way for homebuyers to learn all about the process of applying for a mortgage and becoming a responsible homeowner. Get started today by registering for this affordable online class: https://ehomeamerica.org/nmmfa

Up to three people can register and take the class together but pay only one fee of $45. It takes most people anywhere from six to eight hours to complete the course, but it doesn’t have to be done in one session. Once registered, you may log in and out as many times as necessary. Your certificate of completion is valid for a full year, so you’re welcome to get started as soon as you’d like. The information provided will empower you to make good decisions throughout this entire process.

(Note: To register two people, type the first AND last name of borrower one in the "first name" field. Type the first AND last name of borrower two in the "last name" field. To add a third person, please ask your loan officer for specific instructions.)

Step 2: Gather Your Paperwork

When you apply for a mortgage, your lender will need to assess your financial condition and verify that you can repay the loan. To do this, lenders typically start by requesting the basic items listed below.

Identification and proof of social security number
Two most recent pay stubs or, if self-employed, your tax returns for the past two years plus a current year-to-date Profit and Loss Statement.
Social Security award letter(s) dated within 12 months (in some cases)
Bank statements for the past two months on all accounts
Investment account statements for the past two months (including 401(k) & IRA)
Divorce decree and child support orders (in some cases)
Names of creditors and account numbers for other types of debt such as credit cards, auto loans, personal loans and student loans
Name and address of your landlord(s) for the past 12 months.

Please note that your lender may need additional documentation, depending on your circumstances. Always respond to your lender’s requests as soon as possible to help keep your application on track.

Step 3: Choose Your Housing New Mexico-Approved Lender

Click here to see a complete list of approved lenders: https://housingnm.org/lenders-realtors/participating-lenders

Only lenders that have been approved by Housing New Mexico are able to access our down payment assistance funds on your behalf. To begin, consider selecting two or three lenders from the list so you can compare their offers over the telephone. By calling each one and having a conversation, you’ll get a good feeling for which one you’d like to work with. Keep in mind that most lenders are extremely busy, so you’ll probably need to leave a message. Most will call you back by the next day. If they wait longer than that to call back, you may want to move on to a different lender.

Here are some things you may want to ask:

Can you please describe how the process works and tell me how often I can expect to receive status updates?
Which REALTOR® do you work with the most?
Does your company allow you to utilize all Housing New Mexico programs or only certain programs?
I’m not able to take personal calls while I’m at work. Would we be able to talk after work hours? Can you finance a manufactured home? (If applicable)

Step 4: It’s Time to Apply!

Most lenders have an online application available and a secure portal where you can upload your documents. It’s important to be neat and accurate when completing your application. Answer all questions honestly and be candid with your loan officer about any concerns you may have. They have the knowledge and experience to overcome obstacles, but they can’t do that if you aren’t honest from the beginning. Your loan officer, along with your REALTOR®, will work hard to help you become a successful homeowner. They will work together to guide you through the process and answer any questions you may have along the way.

Step 5: Partner with a REALTOR®

Now that you’re preapproved, it’s time to search for your new home. Housing New Mexico strongly recommends that homebuyers work with a REALTOR®. Your REALTOR® will help you find a home you like that is within your price range, help you negotiate with the seller and ensure that your rights as a homebuyer are protected.

Once you decide which REALTOR® you’d like to work with, they will be your partner throughout the entire process and will be able to show you any home in your area, even homes that are listed with another REALTOR®. They can also provide guidance in the event you’re interested in a home that is for sale by the owner. They will work with your lender to make sure everything goes smoothly with your transaction. You can ask your loan officer, friends, family or a co-worker if they know any REALTORS® they’d recommend. If not, you can find one through this link: https://realestateofnewmexico.com/agent/search

Here are some things to consider when choosing a home:

Price
Your lender can tell you approximately how much you can spend on a home, based on what monthly payment is most comfortable for you. Although you may have to stretch just a little, depending on your local market, you’re not obligated to buy at the very top of your price range. Your lender and REALTOR® will respect your decision and work hard to make homeownership as affordable as possible for you. Your lender will determine which Housing New Mexico assistance programs will save you the most money.

Wants vs. Needs
Think about what’s most important to you when choosing a home. Location, safe area, proximity to public transportation, school, childcare and work often top the list for buyers. Remember that your first home doesn’t have to be your "forever" home. Be willing to give up a few luxury items if you have to. The goal now is for you to start building home equity, so you’ll have more to spend on your next home or other goals such as starting your own business. It takes most people several years to make their first home look more like their dream home, so be patient and don’t lose sight of the fact that you’re just getting started on your wealth-building journey that is The American Dream!

Making an offer
When you find a home you like, your REALTOR® will perform a market analysis to determine whether the asking price is reasonable. Although they will give you their best advice regarding a reasonable offer price, the final decision is yours. If the seller accepts your offer, you will be under contract to buy the home. Your REALTOR® will open escrow at a local title company and instruct you to make out an earnest money check for them to hold safely on your behalf. Escrow is a financial arrangement in which a neutral third party, such as a title company, holds funds on behalf of two parties involved in a transaction, until specific conditions are met. Earnest money is an amount the buyer is willing to put aside to show the seller that they are serious (earnest) about buying the house. Your REALTOR® will explain under what circumstances you would be entitled to get your earnest money returned if the transaction does not close. The idea is for both buyers and sellers to act in good faith and have their interests protected as much as possible. The amount of earnest money can vary, depending on the local market, but anywhere from $500 to $1,000 is generally considered typical.

Inspections and home warranty
As a homebuyer, you have the right to have many different types of home inspections. Some inspections are not optional because they will be required by your lender. Your REALTOR® and Lender will explain the details. Buying a home is likely the largest purchase you’ll ever make, so it’s important to know everything you can about the condition of the home. In some markets, sellers are often willing to purchase a home warranty for the buyer which would cover certain repair needs which may arise in the first year.

Step 6: Closing on Your New Home

Closings in New Mexico are handled by title companies. The title company is responsible for making sure you will have a clear title to the home, and that buyers and sellers sign the necessary legal documents. When you first went under contract to purchase the home, your REALTOR® opened escrow with a specific title company. More than likely, you were instructed to make out your earnest money check to the title company. Your closing will take place at that title company, either in person or through the mail. You can expect to sign several documents at closing, including promissory note(s), mortgage(s), affidavits, disclosures, acknowledgments, and others. The seller will sign documents as well. Only you, your lender, and title officer will see your loan information, so you can be sure your private information is kept confidential.

After signing, the title company is responsible for having certain documents officially recorded with the county clerk. This is the point at which title to the property becomes yours. Once your lender is satisfied that all documents have been properly signed and recorded, your loan will be funded. Funding means that your lender wires your loan proceeds to the title company, and they, in turn, pay the seller of the home. You will take possession of your new home after funding occurs.

Congratulations - you are a homeowner!

If you would like more help understanding the homebuying process and deciding if it’s right for you, take a look at Housing New Mexico’s Homeownership Manual.