Loan FAQs
Find and Compare the Best Loans
Q. How do I apply for, OR get more information about a loan that I have found through the loan Search and Compare?
A. There are two ways you can receive additional information and start the loan process.
To have the lender who is offering the loan you have found contact you, simply click on Request Lender Contact button and complete the short questionnaire. You choose how and when you wish to be contacted.
To prequalify, click on the Prequalify button. Here you will find a questionnaire requesting more detailed information that will provide the lender with more information as to your specific loan needs. You will NOT be required to provide your Social Security Number or SIN, nor will we perform any type of credit check. Your lender will let you know what additional information they will need after making contact with you.
Q. How much of a down payment is required on a Standard Mexico loan?
A. US Dollar based loans require a minimum down payment of 20%, and Mexican Peso Based Loans have down payment options as low as 5%.
Q. What factors are considered in the loan approval process?
A. Your Income & Assets
The amount of income one earns ultimately determines the amount of money that can be borrowed to purchase a home. To illustrate, if a person is earning $7000 a month and has a monthly mortgage payment of $1,500, the housing expense ratio is 21% ($1,500/$7,000). Lenders look for a housing expense ratio no higher than 33%. Lenders in the Mexico Mortgage Marketplace also consider other assets and will explain your options upon making contact.
Your debts
Lenders look at the amount and payments of your monthly debt, including any loan payments (auto, student loans, etc), including credit card debt.
Your employment history
Steady and stable employment in work history is important. Mortgage lenders are more likely to lend money to individuals who have worked several years at the same company or in the same field/line of work. A Verification of Employment Document may be requested by the lender to verify your employment history.
Your credit score
Everyone has a credit history report and FICO score that is filed with the major Credit Bureaus. For US Dollar based loans, lenders will request and receive a copy of your credit history and FICO score in the loan application process in order to determine your willingness to repay historic debt as a borrower. Qualification for Mexican Peso based loans are not FICO driven.
Q. What loans are offered in Mexico?
A. Loan types
Loans offered are either fixed rate loans or Adjustable Rate Mortgages (ARMs). Fixed rate loans are generally amortized over a period of 15, 20, or 30 years. Due to shorter time commitments for interest rates, ARM initial rates are typically lower than longer term fixed rates. ARMs are generally best suited for shorter term borrowers. Both Fixed and ARM loan types are explained below.
30-Year Fixed Rate Loan
Thirty-year fixed rate loans have 360 equal monthly payments for the entire 30-year period of the loan. Upon completing the payment stream, the loan is considered paid in full. The monthly payment is based on a fixed interest rate which stays constant over the term of the loan.
20-Year Fixed Rate Loan
The twenty-year fixed rate loan is the basically the same as the 30 year fixed rate loan with a shorter duration of 240 months. Monthly payments for this loan type are generally slightly higher than the 30-year fixed rate loan, as the loan is paid off ten years earlier.
15-Year Fixed Rate Loan
The fifteen-year fixed rate loan is the basically the same as the 30 year fixed rate loan with a shorter duration of 180 months. Monthly payments for the 15 year fixed loan are generally higher than the other two fixed loan types as again, the loan is being paid off in only 15 years half the time of the 30-year fixed.
About Fixed Interest Rates In general terms and under normal market conditions the longer a lender agrees to keep the interest at a fixed rate, the more risk there is for the lender. This is why, generally interest rates on 15-year fixed rate loans are slightly lower than on 20 or 30 year fixed rate mortgages.
1 Year Adjustable Rate Mortgage (ARM)
A one-year ARM loan has monthly payments which are based on a 30 year schedule of repayment. However, the interest rate, and your monthly payments are subject to change every 12 months (this is commonly known as the "adjustment period"). The new interest rate is based upon market fluctuations tied to indexes, typically the United States One Year Treasury Security Rate, and is calculated by adding a specified amount to the index. The monthly payment changes, as needed, at each adjustment period, to reflect the adjusted rate.
3/1 Adjustable Rate Mortgage (ARM)
The 3/1 ARM loan has monthly payments which are based on a 30 year schedule of repayment.The interest rate on a 3/1 ARM remains fixed for the first 36 months (three years) of the loan period. After the initial 36 month period,the interest rate, and monthly payments are likely to change every 12 months (this is commonly known as the "adjustment period"). The new interest rate is based upon market fluctuations tied to indexes, typically the United States One Year Treasury Security Rate, and is calculated by adding a specified amount to the index. The monthly payment changes, as needed, at each adjustment period, to reflect the adjusted rate.
5/1 Adjustable Rate Mortgage (ARM )
The 5/1 ARM loan mirrors the 3/1 ARM with the difference being that the interest rate remains fixed for the first 60 months (five years) as opposed to the first 36 months (three years). After the initial five year period, the interest rate, and the monthly payments are likely to change every year.
7/1 Adjustable Rate Mortgage (ARM)
The 7/1 ARM loan mirrors the 3/1 ARM and 5/1 ARM loans with the difference being that the interest rate remains fixed for the first 84 months (seven years) as opposed to the first three or five years. After the initial seven-year period, the interest rate, and the monthly payments are likely to change every year.
Stated Income/No Asset Verification Loan
The Stated Income/No Asset Verification loan is used by borrowers who do not wish to or are unable to verify their income and their assets. Once again, the interest rate and/or costs for such loans may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers without verifying their income or assets. Lenders offset risk on this loan type by loans primarily to borrowers who have an excellent credit history 720+ FICO scores
Construction and Construction to Permanent Financing Loans
The construction loan is used to finance the construction of a home. Unlike a mortgage loan where the entire amount of the loan is provided to the borrower at the time the loan transaction is closed, a construction loan involves a series of payment disbursements which are linked to the builders construction schedule. Some construction loans have fixed interest rates, others are based on variable interest rates. In addition, some construction loans automatically convert to a regular mortgage once construction is complete, while others may require a new mortgage transaction to take place so the borrower can payoff the construction loan and roll into permanent financing.
Q. What is loan-to-value and how does it determine the size of the loan?
A. The loan amount you receive will depend on the appraisal value of the property and your down payment. If you are purchasing a $200,000usd home with a $40,000usd down payment, it will be necessary to borrow an amount of $160,000usd from a lender to purchase the property. This will be 80% of the home value; therefore, the Loan-To-Value (LTV) of your mortgage is 80%. The higher the LTV, the less cash home buyers are required to pay out of their own funds.
Q. What are the loan minimums and maximums in Mexico?
A. The minimum loan is $50,000 USD for a Mexican peso loan which is not FICO score driven but does require a Mexican bank account. The minimum loan for a US Dollar based loan is $100,000USD. The maximum loan is generally $5 million USD, but lenders do consider higher amounts on a case by case basis.
Q. What documents are needed to process my loan?
A. What types of documentation do I need for the application?
Based on the loan program you choose, the exact documents required will vary. In general, the lender will request to see:
- Federal income tax statements and verification of any additional income for three years
- Your two most recent W2s.
- Current paycheck stubs
- Your six most recent bank statements
Q. What do the words amortization, principal and PITI mean?
A. Amortization
Gradual debt reduction over a fixed period of time. Normally, the reduction is made in accordance with a pre-determined schedule for monthly installment payments.
Principal
The original balance of loan/mortgage amount, excluding interest; ongoing, the remaining balance left after paying on a loan, excluding interest.
PITI
Principal, Interest, Taxes, and Insurance which are the components of a mortgage payment.
Q. What is the difference between the mortgage rate and the APR?
A. The APR (Annual Percentage Rate) of a loan is the interest rate with all the applicable closing costs included. Unfortunately, not all lenders include the same costs, so APR will differ.
Q. Is the interest on my Mexican home loan tax deductible?
A. IRS regulations do not specify that the property must be located in the United States in order for interest to be tax deductible and many tax attorneys consider interest on a Mexico loan to be, in fact, tax deductible. However, as with all financial matters regarding taxation laws both in Mexico and in your home country, we advise all site visitors to consult their individual tax advisors.
Q. Who is eligible for a Mexican Peso based loan?
A. Peso Based Loan Programs are available to citizens of any nation.
Q. How long does it take for my loan to close?
A. Once all paperwork is thoroughly completed, it takes approximately 4-6 weeks for the loan to be funded. Total loan completion times from initial application to funding take approximately 90 days.
Q. What's in a typical mortgage payment?
A. Mortgage payments consist of costs for principal, interest, property tax, hazard insurance, and mortgage insurance.
Principal
The principal is the amount of money you borrowed. Each month when you make your mortgage payment, you are paying back a small portion of the principal. The longer the payments are amortized (over 30 years for example), the more the payments go to reduce the principal you owe; over time, interest will become a smaller part of your monthly payment. In the beginning, most of the mortgage payments made to the lender will be interest payments.
Interest
Interest is the cost of borrowing money, usually expressed as an annual percentage of the loan amount- for example 8.35%, 9.009%, etc. Lenders will offer different rates depending on the type of loan program offered.
Property Taxes
These are taxes paid to local governments, usually charged as a percentage of the property value. Your lender collects the taxes through your monthly payments. The amount of tax will vary depending on the location of the home.
Hazard Insurance
This is a contract that protects you from any financial losses on your property that might result from fire, flood, or any other "hazards."
Mortgage Insurance
This is an insurance policy that pays mortgage lenders for part of their financial losses if a borrower fails to fully repay a loan.