Ask the Mortage Experts...

With mortgages becoming more of the norm in Mexico and with ever-increasing loan options, The Tribune is helping sort through the confusion by having your personal Financing/Mortgage questions answered by our local experts – David Schwendeman and Terence Reilly, Founder’s of MEXLend, an industry-leading Mortgage Broker based in Vallarta.

We invite you to e-mail your questions regarding buying or financing Real Estate in Mexico to buyinginmexico@hotmail.com.

Q: “I am in the process of making an offer on a condo. I have already been pre-qualified for a loan but the developer has expressed concern about a mortgage delaying our closing. Is this correct?” Steve Y., Coeur d’ Alene, ID

A: Real Estate closings, whether cash or financed, take longer in Mexico than most Americans are accustomed to, but just because a purchaser has a mortgage vs. buying with all cash, does not at all mean that the process will take any longer.

In fact, recently a new development here in Vallarta saw two of its first closings from buyers with mortgages. The mortgage deals actually closed faster than the all-cash deals.

Of course, the degree of perceived difference is dictated largely, by local custom in the buyer’s home state. For example, in New York City, it is common for a transaction to take 60 – 90 days as attorneys go back and forth over contract details and buyers wait for Co-Op boards to review their credentials.

A New Yorker purchasing a home in Mexico might actually find the process faster.

However, buyers from most suburban and some urban areas of the US – where Realtors draw up Purchase and Sale Agreements, Co-Op Apartments are not the norm and Appraisers and Title Companies aren’t backlogged with more business than they can handle – are accustomed to a 30 to 60 day closing lead times. Most of the time differential South of the Border is brought about by the necessity of obtaining permission from the Mexican federal government for the transaction (The SRE permit) and the establishment of the Trust (Fideicomsio) whether a mortgage is part of the package or not.

There are three ways to ensure that the transaction comes to the closing table as quickly as possible.

One: Choose your mortgage broker carefully.

The mortgage industry is still relatively new in Mexico, and many brokers do not understand the laws and intricacies of Mexican real estate. Our office receives at least ten calls a week from brokers in the US and Canada wanting to get into Mexican Mortgages.

As the market gets tighter up North, more and more are looking towards Mexico.

Most do not have the necessary education or experience to handle these transactions.

You want to work with a company who has a presence on the ground in Mexico, preferably an office but at the very least a body that can run your documents and expedite the various processes.

Check with your realtors and ask around. In this case, a bargain broker – operating his Mexican business as a sideline to his US business is not the best option.

Beware of interest rate and closing cost estimates which are unrealistically low. It may be tempting to go with a broker who offers you an extremely attractive interest rate or lower closing costs – only to find out just prior to closing that your interest rate has gone up 2 percentage points and your closing costs are $15,000 higher than originally quoted.

There are genuine variables which could, legitimately, cause your closing costs to be higher; such as certain fees paid in Pesos which have fluctuated against the Dollar by the time of closing OR a drop in credit score which could put a borrower into a higher interest category.

Again, your Realtor or a trusted friend who’s already financed in Mexico is a good source of referral information. They’ll know which brokers perform and which do not.

Two: The buyer should pre-qualify for a loan BEFORE signing any contracts.

This gives you peace of mind and also a realistic view of just how much of money you can borrow.
Your broker will also give you a list of all of the documentation required for the loan and once you do sign a contract, you will have everything ready to submit to a lender, thus saving you and the seller much needed time.

Lending in Mexico is highly conservative and very safe. Clients must have credit scores frequently above 680 and be prepared to prove incomes via tax returns and bank statements.

The quicker they provide that documentation, the quicker loan commitment will come from a lender and the faster a purchase can close.

Once the client has loan commitment from a lender or bank, they must maintain their credit standing, as another report is often pulled just days before closing.

We council our clients not to change their buying habits (don’t buy that new Mercedes!), and be absolutely certain to pay credit cards and mortgages on time.

Three: The seller must have ALL documentation ready to deliver BEFORE entering into a contract.

In order to apply for the SRE permit, all up-dated property documentation must be supplied to the chosen trust bank for the buyer.

The property taxes, homeowner’s association dues and all bills must be current and the property must be free of liens.

When financing is utilized, IF all documentation is ready and supplied to your mortgage broker and lender, financing should only add an additional week or two to an ordinary closing.

The operative word in that previous sentence is…IF.

One hears of sellers disillusioned with the time frame involved in the financed transaction, but rarely do you hear the back story from that seller. In nine out of ten cases, the causes for delays are directly linked to the seller not providing updated property documentation in a timely fashion.

This inability or the lack of urgency on the part of the sellers to provide the property documentation is the leading factor in delayed closing times.

A lender or broker cannot even start the closing process without current property documents.

All too often the seller will take weeks (or months) to provide these papers and then once when finally tendered, will demand that a closing occur immediately.

This happens periodically, and unfortunately, things just don’t work that way. Here is why:

Lenders are conservative…all cash buyers, sad to say, are often not.

A lender will not deem the property as worthy collateral if there are ANY improprieties or unpaid back taxes, bills, liens, zoning issues, etc.

Sometimes, an unwary all cash buyer will plow through unknowingly and expect the open issues to be taken care of at the closing table or shortly thereafter.

A bank or lender will never be this reckless. A significant number of all cash buyers enter into transactions which do not benefit from adequate scrutiny and end up taking on the previous owner’s problems.

A financed buyer will never face that problem.

Yes it does take longer to dot all of the I’s and cross all of the T’s when a mortgage is involved – but all parties can rest comfortably that the transaction is secure.

MEXLend, Inc. is a Mexican mortgage brokerage that currently represents 8 different lenders offering 75 different loan options in Dollars, Pesos and Euros for buyers looking to purchase vacation or investment property throughout Mexico – including products specifically for Canadian citizens.

In announced results based upon post-closing client interviews conducted by Mexico’s largest US lender, MEXLend won the #1 mark of distinction for both client satisfaction and fastest closings for the second straight cycle.
MEXLend can be reached at 322-132-7991 (in Vallarta), 917-779-9061 (while in the US or Canada), toll–free in Mexico by calling 1-800-3-Mi-Casa or go online at www.mexlend.com (For US and Euro loans) or www.mexlend.com.mx for Peso loans.