Banks and Mortgage Companies
Most banks and mortgage companies are more than happy to prequalify you for a loan while you are still hunting for that perfect home. This is actually a perfect time to arrange for your financing as it allow you the chance to understand your financing options as you negotiate your home purchase.
- A “Preapproval” letter from your bank is their agreement to lend you up to a specified amount to purchase your new home, subject to certain conditions.
- A “Prequalification” letter lets you know about how much you can borrow to buy your new home, based on the financial data you provide.
Once you chose a lender, you can begin the application process either in person, over the phone, or online. Before you start the application, you should have the following information on hand for each applicant:
- Social Security Number
- Email address
- Gross income amount, including secondary income sources, if applicable
- Asset information, including the value of your banking, investment, and other accounts
- Current expenses, including housing, credit card, and loan payments, child support, and other obligations
- Previous address if you’ve been in your current residence for less than 2 years
- Name and address of your employer, and of your previous employer, if you have been at your current job less than 2 years
- Estimated purchase price of homes you are considering
- Estimated down payment amount if you are purchasing a home
After you have completed the application, you will be required to send supporting documents, like account statements and paycheck stubs to your mortgage consultant. As a mortgage specialist is verifying your information, be prepared to send more supporting documentation, as required.
The entire loan process usually takes about 30 days after all the documentation has been submitted. It is important to stay in contact with your mortgage consultant during this time leading up to your closing date. This will allow you to be prepared in the event additional information is needed to finalize the loan.
Delays and postponements are quite common during the loan process. That’s why it is important to have a REALTOR® who can oversee the entire transaction for you from finding the perfect home to closing the loan. They will know how to work through any challenges that occur.
Financing a Ranch or Rural Home
In our 35+ years experience in selling ranches in New Mexico, we have dealt with many lenders and have come to appreciate the expertise of the following bankers:
- Capital Farm Credit — Capital Farm credit has been providing financing to rural landowners, country homeowners, ranchers, and agribusiness firms for over 90 years.
- Choice Financial — Choice Financial has knowledgeable and experience ag lenders whose primary goal is to completely understand your operation and assist you with loans to purchase real estate, equipment, or livestock.
- Farm Credit — Whether you’re just starting your agribusiness or you’ve spent decades building it, whether you’re expanding your operation or preparing to pass it to the next generation, Farm Credit of New Mexico can help you get where you’re going.
- NM AG Credit. They can finance farms, ranches, agribusinesses, your country home, or other rural properties.
There are many other terms for owner financing, including contract for deed, real estate contract, purchase-money mortgage, land contract, installment contract, conditional sales contract, and bond for deed. Some forms of seller-financing may apply in one state but not the other.
New Mexico Real Estate Contract
In New Mexico, one of the most common types of seller-financing is the New Mexico Real Estate Contract (REC).
- Seller Benefits – The benefits to the Seller can be that they view the REC as an investment, they can sometimes receive higher returns on an REC than they can get with CD’s or Treasury Bonds, they may like receiving monthly payments, and think that the risk is less than the stock market!
- Buyer Benefits – Buyer benefits can include no points or appraisal to pay for. REC’s are easier to obtain than mortgages because little or no credit is required, and the buyer may still obtain an REC when they can’t qualify for a mortgage.
Payments are usually collected by an disinterested third party, like an escrow company. If the Buyer is 15 days late on his payment, the escrow company will send out a demand letter. The Buyer usually then has 30 days to clear the default or the Seller can take the property back. In New Mexico, this is a fairly easy procedure, due to the fact that the Buyer signs a “Special Warranty Deed” at closing. In the case of default, the “Special Warranty Deed ‘is recorded with the County Clerk and the property returns to the Seller’s ownership.
Defaults are rare if the Seller obtains a down-payment of over 7-10% of the property purchase price. Of course, this can depend on the economy and many other factors. Property taxes and insurance are paid by the Buyer in an REC. Title insurance is recommended at closing.
A wrap-around contract does exactly what it says… it “wraps around” an existing mortgage. It is used to purchase property when the Seller has a mortgage on his property that is not assumable. He sells the property to a Buyer who agrees to pay the Seller directly the amount of the Seller’s mortgage payment or more. The Seller then makes the payment to his mortgage company.
Although this arrangement is fairly common, it is advised to have a third party, like an escrow company, collect the Buyer’s payments, make the payment to the mortgage company, and then send any balance to the Seller. This arrangement provides a record that shows that payments were made made in a timely fashion and protects both Buyer and Seller.
When you’re ready to purchase New Mexico real estate, make sure you’re working with a professional REALTOR® who can make sure your financing is done right. Call us at 505-865-7800 or toll-free at 888-865-7808, or use the form below to send an email!
Other Financing Options
The sale of a business or investment asset can create a large income tax liability. A properly structured tax deferred exchange under Internal Revenue Code 1031 can allow businesses and individuals to defer the recognition of the capital gains or other taxes associated with the sale of most assets as long as new assets are purchased to replace existing assets.
Exchanges are structured either as a real property or personal property exchange. Real property exchanges include only interests in real property, while personal property exchanges can include almost any other type of property.
There are several restrictions that can apply so it is important to contact a REALTOR® at Centerfire Realty who has experience in 1031 exchanges, who can help you nominate properties for the exchange, and can advise you on selecting an “Intermediary” who can facilitate the process.