Congratulations! You are in the final stretch! However, the joy of finalizing the real estate deal brings with it the stress of financial planning. A rookie mistake that can land you in hot water is not considering buyer closing costs in New Mexico (NM).
- Closing costs, also known as “settlement costs,” are the final expenses to complete the real estate transaction.
- Closing costs are separate from the price of the property.
- The 3 major Buyer Closing Costs in NM are:
- 1. Loan Origination Fee
- 2. Escrow or Impound Account
- 3. Inspection and Appraisal Fees
- Due to local tax rates, buyer closing costs in NM also depends on where the buyer lives.
- The buyer can negotiate certain closing costs with the seller and the lender.
What are Closing Costs in New Mexico?
Closing costs in New Mexico are a set of expenses that the seller and the buyer must pay to finalize the real estate transaction and transfer the ownership of the house.
Who Pays Closing Costs in New Mexico?
The sellers and buyers pay certain closing costs when finalizing the real estate transaction.
In some cases, the seller may offer to pay the buyer closing costs in NM to improve the prospects of selling their home faster. They offer to cover an incentive for buyers to remove certain terms and contingencies from the sales contract.
How Much are Closing Costs in New Mexico for Buyer?
Average closing costs in New Mexico for buyers tend to be between 2%-5% of the sales price. Currently, the typical home price in the state is $300,527. This means a buyer may end up paying $6,010 – $15,026 as closing costs.
Typical Closing Costs for Buyers in NM
If you are a buyer, here are some closing costs you may have to pay when buying a house.
1. Application Fee
The application fee is an upfront fee lenders charge on submitting your loan application. Mortgage lenders in New Mexico typically charge 0.5%-1% of the loan amount as an application fee.
This is a non-refundable charge. So, you will not get this money back even if your loan application is rejected. Some lenders collect the application fees as a deposit for closing costs, while others charge it as a separate fee.
NNot all mortgage lenders in NM charge an application fee.
2. Appraisal Fee New Mexico
It is a common practice for lenders to hire an appraiser to determine the fair market value of the property you want to purchase before granting the loan amount. This helps them determine the loan amount and the loan-to-value ratio.
The appraiser has to be compensated whether the mortgage gets approved or rejected. Hence, the appraisal fee needs to be paid upfront.
Your real estate agents may include an appraisal contingency clause in the sales contract, especially if you need a mortgage. This gives you the right to walk away with your earnest deposit if the appraised home value does not match the agreed-upon price.
» How Much is a Home Appraisal in New Mexico: Find out more about this closing cost in NM.
3. Attorney Fee
The state of New Mexico does not mandate the presence of a real estate attorney at closing. Some instances where the services of a real estate attorney can prove helpful are joint ownership of the house, private loans from family or friends, the presence of easements on the property, etc.
Real estate attorneys draft and review the purchase agreement and transfer of title on behalf of the lender while also offering advice on negotiations.
The attorney fee depends on your area of residence in the state and the number of hours of service you require.
4. Closing Fee/ Escrow Fee New Mexico
The Title Companies & Escrow agent charges a closing fee for the disbursement of funds between the buyer and the seller. Your title company or attorney can be your settlement agent in New Mexico.
5. Courier Fee
The courier fee covers the cost of sending the documents to various parties. The buyer pays the courier fee.
6. Credit Reporting Fee
The credit reporting fee is the cost of obtaining a credit report. The lender will analyze your credit report to estimate your ability to pay back the mortgage. They may request your credit report multiple times during the loan application process to ensure there are no negative changes.
If you are sharing the mortgage with another borrower, the lender will request their credit report as well.
7. Discount Points/ Mortgage Points
You can lower or buy down your mortgage interest rate by purchasing discount points from the lender. It is a prepaid interest you can pay upfront to lower your monthly mortgage payments.
The lender charges a fee to lower a set amount of interest rate called points. The value of discount points is based on the type of loan and prevailing mortgage rates and is decided by the lender. Generally, one discount point can be bought for a fee of 1% of the mortgage amount. Typically, lenders slash the interest rate by 0.25% for every discount point.
» Mortgage Brokers in New Mexico: Do You Need One for Buying a House?
8. FHA Mortgage Insurance
All FHA loans require mortgage insurance. If you are opting for this type of loan, you are required to pay an upfront premium and an additional annual fee. The amount of these payments is based on the size of the loan.
FHA loans are designed to help moderate-income buyers with lower credit scores become homeowners. It is insured by the Federal Housing Administration (FHA).
9. Flood Certification Fee
If the property you intend to purchase is in or around a flood zone according to the Federal Emergency Management Agency (FEMA) maps, you must acquire a flood certification. This report is used by the lender to determine if special flood insurance is required.
10. HOA Transfer Fee New Mexico
If the seller is a part of the Homeowner Association, at the time of closing, the ownership of the house needs to be transferred from the seller to you in the HOA records. The HOA transfer fee is a one-time non-negotiable charge you must pay the HOA to update their records.
11. Homeowner’s Insurance
Most lenders require you to purchase homeowner insurance before they finance the loan, as it protects their investment. Homeowner’s insurance premiums are usually a part of the escrow funds.
12. Lead-based Paint Inspection
If you are purchasing a house built before 1978, you must get a lead-based paint inspection done. The cost of the inspection varies according to the size and location of the property.
Moreover, according to the Residential Lead-Based Paint Hazard Reduction Act of 1992, you can conduct a lead-based paint within 10 days of signing the contract. If lead hazards are identified, you can cancel the contract without any penalty. Some buyers may waive off this right.
However, the law does not require the seller to conduct or pay for the inspection.
13. Lender’s Title Insurance
Mortgage lenders will require you to purchase a lender’s title insurance. It protects them against loss over potential defects in the title or legal claims over the house. The lender’s title insurance must cover the full amount of the loan.
» Title Insurance Rates in New Mexico: Need to protect your investment? Here’s how much it will cost.
14. Loan Origination Fee
Once the mortgage has been approved, the lender charges an upfront loan origination fee to process the loan. The lender will inform you about this charge before the loan is processed.
15. Mortgage Escrow Account/Impound Account
The lender may open a new escrow account or use the previously established one to pay the property tax and premiums for homeowner’s insurance and mortgage insurance. The escrow funds are deposited from the monthly mortgage payments. The impound account is managed by a mortgage servicer who will make the payments on your behalf.
16. Private Mortgage Insurance
If you opt for a conventional loan and make a down payment of less than 20%, your lender will require you to buy Private Mortgage Insurance (PMI).
You can choose to pay the complete or a partial amount of PMI upfront to lower your monthly mortgage payments.
17. Pest Inspection Fee
A pest inspection is usually required if the appraiser observes any signs of structural damage due to pest infestation. However, some lenders require an official report by a licensed New Mexico home inspector before approving the mortgage.
In New Mexico, a pest inspection is required before a VA loan can be closed.
» New Mexico Home Inspection: Home inspection is a crucial part of a real estate transaction. Here is what you need to know.
18. Prepaid Daily Interest Charges
The monthly mortgage payment is due on the 1st of every month, starting 30 days after closing. However, the interest on the mortgage starts accumulating from the day of closing itself. You must pay the accrued interest from the closing day to the first mortgage payment as closing expenses. These are called prepaid daily interest charges.
So, for instance, if you purchase a house on the 4th June, your first mortgage payment will be due on the 1st August. You will have to pay the accrued interest on the loan from 4th June to 31st July at the time of closing.
19. Property Tax
Homeowners pay property tax to the local government. The amount of property tax is proportional to the market value of the house. Buyer property tax starts to accrue from the day of closing.
Lenders often require buyers to pay one year’s worth of property tax in advance at closing. These funds are usually collected and paid via the escrow account.
20. Rate Lock Fee
A rate lock fee is a cost of fixing the mortgage interest rate at a specific price for a set period. Locking the interest rate keeps you safe from market fluctuations. Keep in mind that once the rate lock period expires, most lenders charge an additional fee to extend it.
While a rate lock can save a significant amount of money in interest, it is important to note that lenders can void the rate lock at any point if your debt-to-income ratio increases and your credit score declines.
21. Recording Fee
A recording fee is paid to the local government to register the change in ownership of a house or sale of a property in the public record. Additionally, it records mortgages and other liens against the house. It is usually charged by the county.
22. Survey Fee
A survey fee is paid to a professional surveyor who creates a drawing of the property highlighting its boundaries, easements, improvements, and the physical features of the land, like home elevation, etc. It will give you a better idea of the property you are buying in an official and legal capacity.
While land surveys are not mandatory in New Mexico, lenders and title companies may at times require the report to issue lender’s title insurance.
The survey fee depends on factors like the dimensions of the property, its terrain, and accessibility.
23. Tax Monitoring/Tax Status Research Fee
A tax monitoring fee is paid to a tax service agency that monitors if you pay the property tax on time. The tax service agency alerts the lender in case you default. It is also sometimes referred to as a tax service fee.
Lenders opt for tax monitoring to prevent tax liens and protect their access to the property.
24. Title Fees New Mexico
A title agency charges a title search fee to determine the legal ownership of a property by examining public records like deeds, tax liens, land records, court judgments, etc. The title search helps discover any liens or claims on the property that the seller may also be unaware of.
25. Transfer Tax
Transfer tax is levied by the municipality, county, or state to the transfer of ownership of the house from the seller to the owner. The tax amount is based on the market value of the property. The transfer tax is also called deed tax, mortgage registry tax, and stamp tax.
So, who pays county transfer tax in New Mexico, and who pays city transfer tax in New Mexico? Usually, the seller pays both transfer taxes. However, the buyer must pay the transfer tax if the seller does not or if it has been negotiated as a buyer closing costs in NM.
26. Underwriting Fee
Mortgage underwriters charge an underwriting fee to evaluate and verify loan applications. It is a one-time fee Some lenders charge it in place of the originating fee, while others charge it in addition to the same.
27. VA Funding Fee
The VA funding fee is a one-time fee paid to the Department of Veteran Affairs (VA) that runs the VA loan program. The VA fee you have to pay depends on the down payment they make for a property. if you make a down payment of less than 5%, you have to pay a VA fee of 2.3% for your first home and 3.6% on any subsequent homes.
|Down Payment||VA Fee for 1st Loan||VA Fee for Subsequent Loans|
|Less than 5%||2.3%||3.6%|
|5% or more||1.65%||1.65%|
|10% or more||1.4%||1.4%|
How to Reduce Closing Costs in New Mexico?
1. Opt for a real estate broker who offers a rebate program
Some discount real estate brokers in New Mexico may offer you incentives like rebates that help lower closing costs and/or buy down the mortgage interest. Real estate agent services are free for buyers as sellers pay the agent commission for both parties.
2. Compare lender mortgage rates
You can compare lenders to choose the one offering the best mortgage rates and benefits. If you have a preferred bank, you can also negotiate the mortgage rate with them. Further, if you have received an offer with a lower rate from a different lender, you can share it with the preferred bank and ask if they can match or beat it.
3. Compare loan estimate forms
Lenders are required to give you a loan estimate form within 3 days of completing the loan application. The document list all costs, including the loan amount, interest rate, and monthly payments. It also has a section called “services you can shop for,” where you can compare various lender-preferred vendors. Nonetheless, this does not mean that you cannot opt for independently chosen vendors.
However, it must be noted that independently choosing vendors carries the risk of increased closing costs if they increase their pricing before closing. Lender-provided vendors are not allowed to change their prices by more than 10% from the original quote.
» How Can You Get Preapproved for a Mortgage: Having a preapproved mortgage can help you buy a house faster. Here’s a comprehensive guide.
4. Negotiate lender fee
As mentioned above, some lenders charge origination and/or underwriting fee. You can request the lender to waive these fees or negotiate a lower charge.
5. Close at the end of the month
By closing at the end of the month, you can save on the prepaid daily interest charges.
Here’s you can calculate the prepaid daily interest savings:
Step 1: Multiply the loan amount by the interest rate. For instance, if the rate is 5 percent, multiply by .05. This will give the annual interest expense.
Step 2: Divide the annual interest expense by 360 to get the daily interest charge.
Step 3: Multiply the figure calculated in the previous step by the number of days left in the month plus the first day of the following month.
6. Opt for the no-closing cost option
You can avoid paying closing costs at the time of closing, especially if you are strapped for cash, by rolling these costs in the mortgage. However, lenders that offer this no-closing cost option charge a higher interest rate in exchange for it.
7. Minimize requests
Making demands can make the deal slow and troublesome for both parties. You should make minimal requests, so the seller is more willing to cover some of the closing costs. If there are too many inconveniences, the seller may question your genuineness and feel a need to back out.
8. Make it quick and hassle-free
Most of the sellers aren’t happy dealing with the lengthy transaction. As much as possible, you must keep the transaction straightforward without beating the bush.
9. Ask the seller to cover closing costs
Depending on the market conditions, you can negotiate the deal with the seller by requesting them to cover some of the closing costs for buyers in New Mexico or offer credits towards closing costs.
Closing Cost Calculator New Mexico
Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Costs Calculator is a free tool that factors in these elements to help you calculate closing costs in New Mexico. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.
To find the estimated buyer closing costs in NM, the buyers have to add the property location, home purchase price, and the down payment in the Buyer Closing Cost Calculator.
» Buyer Closing Costs Calculator New Mexico: Check out the closing costs calculator for a buyer for calculating the closing costs for the buyer.
If you have not begun your real estate journey yet, opt for Houzeo. Houzeo.com, a tech company, provides an unbeatable combination of maximum savings, cutting-edge technology, and 5-star customer support.
With its 100% virtual service, Houzeo.com helps home sellers list their property without any hassle from the comfort of their homes, while also allowing home buyers to explore New Mexico homes for sale by owner properties and make offers online.
Houzeo’s customer-centric approach, advanced technology, and flat fee packages make it an ideal choice for those looking to avoid paying high commissions and closing costs.
» Houzeo Reviews: Check out Houzeo.com’s reviews before listing your house!
Frequently Asked Questions
2. Are HOA fees tax deductible in New Mexico?
HOA fees are not generally tax deductible. However, if you are self-employed and have a home office or use part of your home to store inventory, you may be able to write it off in your taxes. HOA can also be tax deductible if you rent the house.
3. How is closing cost for buyers in New Mexico calculated?
Closing costs are a sum of specific settlement expenses. These vary according to the location, mortgage rates, and market conditions. Houzeo's closing cost calculator is a free tool buyers can use to get a close estimate of their settlement costs.
4. What are the closing costs for a buyer in New Mexico?
The closing costs for a buyer in New Mexico are Application Fee, Appraisal Fee, Attorney Fee, Closing Fee/ Escrow Fee, Courier Fee, and Credit Reporting Fee among other fees. Find out more about New Mexico buyer closing costs.
- Who Pays Real Estate Closing Costs in New Mexico: Closing costs vary according to the type of real estate deal. Read to know more.
- What are Typical Closing Costs for a Seller in New Mexico: Knowing about closing costs for seller in NM can help you negotiate a better deal.
- How Much Is a House Inspection in New Mexico: Find out more about home inspection and how much it will cost in NM.
- New Mexico MLS Flat Fee: Want to sell your current house before you buy another? Lower your closing costs by listing your house on the MLS for a flat fee.
- Flat Fee MLS New Mexico Costs: Here’s how much it will cost to list your home on the MLS.
- For Sale By Owners Websites: Here are some of the best websites where you can find For Sale By Owner Houses.
- House for Sale in New Mexico By Owner: FSBO deals can be a great way to lower the overall cost of buying a house in NM.
- Best Real Estate Websites New Mexico: The majority of homebuyers and home sellers go through a real estate website before reaching out to a realtor. Read our list of the top real estate websites in New Mexico.
- Top Real Estate Agents in New Mexico: Check out the top real estate agents in New Mexico who can guide you in your real estate journey.
- Best REALTORS in New Mexico: Check our rankings of the top REALTORS in New Mexico.
- Purpose of Title Insurance in New Mexico: Buying a house? Here’s why you NEED to get title insurance.
- Who Pays Lender’s Title Insurance in New Mexico: Taking a mortgage to buy a house? You are most likely to come across this closing cost.
- Buying a Home in New Mexico: Planning a real estate purchase? Here’s how to get started.
- New Mexico Seller’s Disclosure Statement: What the seller should inform you about the condition of your house in New Mexico.
Eager to Know How Houzeo Works?
We’ve got you covered. Check out the following video to understand how Houzeo works and why it is one of the best For Sale By Owner websites in the U.S.
What is Houzeo?
An overview of what the platform is all about
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