The alternative would be to use FHA financing to buy the house because they currently require just a 620 credit score, so you could be on hte loan application.
Another alternative would be to leave you off the loan application as well.
The exact limit for the FHA loan limit is $271,050, and, yes, the minimum down payment is 3.5%. If you are a first-time buyer (have not owned a home in the past 3 years) you may be eligible for a down payment assistance from the NM Mortgage Finance Authority, but it sounds like that would not be needed if you have a 10% down payment saved up. The 632 score is close to the cut off point, and they have to use it if you are both going to be on the loan. The lender will view scores from several credit reporting agencies. Naturally, your income and debt are also taken into consideration. I recommend using a local lender so you can meet with the person face-to-face, and so if any glitches arise close to your closing they are right here to take care of it.
Sellers used to be able to contribute money back to you at closing for your down payment, but that ended in 2009. They can, however, still help you with your other closing costs. A good Realtor can help you structure your offer so the seller is more willing to contribute funds back to you.
Your closing costs will include the origination fee charged by the lender to get your loan, and prepaid property taxes and insurance. It can add up to several thousand dollars depending on the property you wish to buy, so you may want to take that into consideration when you decide how much of a down payment you want to make. You will get a Good Faith Estimate from your lender early on in the process, and your Realtor should also prepare a Net Out showing you your expenses for each home you you are seriously considering.
You are probably also aware that if you are a first-time buyer, and meet the qualifications, the federal government would like to give you $8000 to buy a home. If you have owned a home for 5 of the past 8 years they have $6500 for you if you move. The key is that you have to be under contract on your new home by the end of April so don't wait too long to get preapproved for your mortgage and start house hunting.
Many buyers do not realize that a Realtor will go to work for them and help them every step of the way, all at NO charge to the buyer. You can't beat free, and the advice and assistance a great Realtor will give you will make the whole process go so much easier. I hope you already are working with someone, but just in case you are doing this on your own please consider giving me a call.
Realtor - Associate Borker
Coldwell Banker Legacy
(505) 980-3941 cell