New Mexico's housing market continues to set record growth. According to the Realtors Association of New Mexico, the state saw a rise of more than 11% in the number of sales in 2017. And that's not all. Median home values have also been on the rise in the state. Zillow reported the average value of a New Mexico home at $186,600 as of August 2018 — and that is expected to increase by 2% in the next year. Despite the rise, it is still an affordable place to buy a home, when you consider the nation's average home value at $216,700. 

Before purchasing a home in New Mexico, buyers should be aware of the closing costs that are required as part of the transaction. Closing costs are various fees paid at a real estate closing. Because real estate transactions involve several entities beyond just the buyer and seller, each of them must be paid for their time and service. In New Mexico, the majority of closing costs are paid to the mortgage lender. Cash buyers are not responsible for these costs. The remaining charges come from appraisers, attorneys, credit bureaus, flood certifications, home inspectors, couriers and survey companies.

Average Closing Costs in New Mexico

For the year 2018, average closing costs in New Mexico equaled about 1% of the purchase price. A buyer purchasing a $200,000 home, then, should expect closing costs of $2,051 In 2018, the national average closing costs were slightly more expensive for a $200,000 home at $2,084.

Sometimes lenders advertise mortgages with zero closing costs. Buyers should be aware of what a zero closing cost mortgage actually entails. It does not mean the buyer saves that cost. It simply means that buyers pay it a different way; specifically, with a higher interest rate on their mortgage. A mortgage company can increase the yield spread over par to cover closing costs. This makes it appear as a free loan, even though the borrower actually pays more over time.

As a general rule, a zero-closing cost mortgage makes sense only for buyers who plan to sell or refinance after a very short time. Otherwise, the higher interest charges end up costing more over time than the closing costs.

What Goes Into New Mexico's Closing Costs

On average in New Mexico, less than 50% of closing costs accrue to the lender. The majority comes from the origination fee. This fee is how a lender makes money for its services. It is expressed as a percentage of the total loan amount. For a $200,000 loan amount, a standard origination fee is $866. A lender might also charge small fees for document preparation and tax services, each usually under $100.

For a $200,000 home purchase, a New Mexico buyer should expect lender closing costs of roughly $881. If the buyer's down payment is higher than the standard 20%, then these costs should be lower.

The remaining closing costs get paid to a host of other entities. In 2018, third-party fees in New Mexico averaged $1,170. The following fees represent the most common non-lender closing costs. Depending on the details of the transaction, a buyer may be required to pay some or all of these fees.

The closing or settlement fee, which is typically the largest non-lender closing cost, goes to the settlement agent. The settlement agent, who is usually an attorney or title company representative, is responsible for executing the transaction and transferring the title from seller to buyer. On average, this fee is $411 in New Mexico.

The next-largest fees are the survey fee, if applicable, and the appraisal fee. The survey fee pays for a professional to survey the property and determine exact property line boundaries. Not all lenders require a property survey, nor do all buyers get one. Its cost in New Mexico is typically $445. A home appraisal, which nearly every lender requires, can average a cost of $498.

Depending on the home's location, a flood certification, usually obtainable for under $10, may also be required.

Finally, a courier or postage fee, usually around $100, may apply. The charge of obtaining a credit report, which is usually required for a mortgage, costs approximately $25 from each of the three major bureaus.

A buyer may be responsible for some or all of the above non-lender fees. All lenders are required by law to provide borrowers with a good faith estimate (GFE) before executing a mortgage agreement. That document provides a best estimate of both lender and non-lender closing costs.

The Bottom Line

If you're looking for a mortgage, remember your costs can rise because of other real estate-associated fees. Closing costs in New Mexico are higher than the national average, but are mid-range when it comes to other states. Keep in mind, you may be able to negotiate some of the fees, and if you're a cash buyer, you'll be able to get rid of the lender fees altogether. 

Oregon (OR): Average Closing Costs

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