ASK THE REAL ESTATE EXPERT by TERENCE REILLY

With the phenomenal growth in Real Estate around Banderas Bay the Tribune is helping sort through the confusion by having your personal Real Estate and 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: “What are the requirements for a Peso Loan?” Josh L, Seattle, WA
A: Peso Lending requirements have become remarkably similar to Dollar Lending requirements in recent months, particularly as it pertains to foreign applicants.

Originally designed and implemented for Mexican Nationals – nearly every Mexican Bank has now developed some type of hybrid program for Foreign Nationals seeking a Peso Loan Option. Our company has launched a division specifically to help navigate the various Mexican bank loan programs, and we have been very successful with both Mexican Nationals and foreigners working in time shares and real estate.

For the purposes of this discussion – we will break the basic requirements down into several categories:

1. Immigration Status and Residency. Originally, borrowers seeking a Peso Mortgage through a Mexican bank needed to be Mexican Citizens, dual Nationals or have FM2 Visa Status. Recently, programs have been opened up or modified to accommodate FM3 Visa Status – but only under certain circumstances; as the source of a borrower’s income is a key factor. (More about that later . . .)

2. Credit History. A borrower’s credit plays an important role in the Peso Mortgage Approval Process. However, Mexican Banks take a somewhat more liberal view towards credit scoring than US Banks. Credit Reports will be pulled from a borrower’s country of origin as well as in Mexico. While US Dollar Lending has rather strict guidelines for credit scoring – FICO Scores of 650 to 680 are the typical minimums – some Mexican Lenders have no formal minimums.

Instead they look at a borrower’s overall credit history and make a case by case decision. We have had borrower’s with credit scores as low as 620 who could not qualify for a US Dollar loan – ultimately, qualify for a Peso Loan. In addition, borrowing on credit as a whole is a relatively new industry for Mexico. Mexican Banks take this into consideration and often allow “alternate credit” history to count towards overall credit worthiness. In short – a borrower who doesn’t have credit cards or previous mortgages under his belt can supply proof of paid utility bills, paid rent and letters from landlords, etc.

These alternate forms of establishing credit history can be of value to the first time homebuyer in Mexico or a foreigner who hasn’t lived in Mexico very long.

3. Income. Documenting income is perhaps the biggest challenge for foreigners when it comes to Peso Mortgage Lending. Any bank, Mexican or otherwise – requires a high comfort level in a borrower’s ability to make regular, timely payments on their mortgage. For those who live and work full time in Mexico with FM2 or Working FM3 Visa Status – the path is clear. Provide your paystubs, tax info, bank statements and/or a letter from your employer and we’re done – income is documented. However, many home buyers are living in Mexico without necessarily working in Mexico. Perhaps they are more or less retired and derive income from retirement savings, investments or other types of passive income in their country of origin. This is where it gets tricky – but can still be accomplished.

In response to this challenge, several Mexican Banks have begun to allow foreign borrowers to supply bank statements from a MEXICAN BANK ACCOUNT as proof of income. As long as there is enough money coming into this account on a regular basis for a minimum period of time this type of “alternate” income documentation will suffice. Some banks require as few as 6 months of bank statements and others 12 to 24 months. This recent modification has made it much easier for foreigners residing in Mexico to take advantage of the Peso Lending options currently available.

4. Language. As a courtesy, US Dollar Banks typically provide 80% to 90% of all Lending Forms and Disclosures in English. When applying for a Peso Loan the documentation is in Spanish. It helps to have a good working knowledge of the language or better yet, utilize a Mortgage Representative who is fully bi-lingual.

Anyone who has ever applied for a mortgage knows there are A LOT of documents to sign and it goes without saying that you should always fully understand what you are getting into.

In closing, mortgage lending options in Mexico continue to increase regularly. Loan programs exist for Mexican Nationals as well as Foreigners and unlike some other world markets at the moment –Mexico is going strong. Many borrowers are hesitant to explore the option of obtaining a loan in Mexico.

There is a lot of old, outdated information on the web and in print. However, due to recent industry changes, in many cases borrower’s who thought they couldn’t qualify for a Home Loan are ultimately pleasantly surprised when they realize they actually can.