There are three popular types of real estate financing currently available in Mexico:
1. Traditional Bank Loans
2. Developer Financing
3. Owner Financing
Traditional Bank Loans
This form of lending for Mexican properties owned by foreigners is relatively new in Mexico.
Traditional Mexican mortgages have come a long way in a very short time. Today we see loans at 20% down with interest rates between 5%- 8% amortized over 30 years. The loans are secured with the Mexican property as collateral. Loan amounts vary between $50,000 up to $5,000,000. Qualifications for these loan are typical to what we are use to.
Full Documentation: We use the borrower’s tax returns for the last two years, as well as W-2 for two years and current pay stubs to determine if they qualify. Rates are the lowest with this form.
Alternate Documentation: Instead of tax returns and pay stubs, we use 24 months’ worth of bank statements. We only look at the deposits in the account, then add all deposits and average them out by 24 to grant qualification.
Stated Documentation: Stated documentation bases qualification on credit score and/or cash reserves. We require a minimum FICO score (credit score) of 680 to qualify for Stated Documentation, as well as higher cash reserves.
These types of loans are more in line to what most buyers are familiar with. You want to be smart when you look for a lender just like you would in your own country. Not all lenders are the same. The cheapest isn’t always the best.
Just like anywhere else you usually get what you pay for. Getting your loan approved is a very complicated process and most of the time is not easy. You want to make sure that the lender you choose to work with is experienced in lending in Mexico. Ask them how many loans they have funded "IN MEXICO".
Don’t spend all your time finding the perfect property only to have it all fall apart because you are dealing with an inexperienced lender. Also ask for a "Good Faith Estimate” because not all fees are the same with every lender. You could get a surprise at closing thinking you got a great deal only to see that the lender made it up in your closing costs.
Having an experienced real estate agent guide you through this process could save you thousands of dollars and a lot of headaches. See our page on "Closing Costs".
This is one of the easiest ways to buy a property in Mexico. Ask your agent if the developer can provide financing. Usually you will have to come in with a 20% to 30% down payment. Normally the qualification for developer financing is your down payment which makes this process very simple. Typically the interest rates are higher than traditional bank financing and terms are shorter. You can expect interest rates between 8-12% with terms anywhere from 5-20 year amortization. For buyers that don’t want to go through the process of qualifying and are willing to take the shorter terms this is a great option for you. Normally we recommend that people use this option for a short term solution until they can qualify for traditional bank financing
Being in a buyer’s market like we are in, has allowed buyers to make offers where the owner will carry a portion of the sales price. The interest rate and the terms are negotiated at the time of the offer. Depending on the seller’s circumstances, we have seen some very creative offers accepted in order to make the sale. Having an experienced agent help you form the offer is highly recommended. Once again we believe that this is a short term solution until either the balance is paid off or traditional financing is secured.