When looking to purchase a home abroad, or anywhere really, it is important to have your financing options clear. Mortgages are one of the most common means of financing a property, but shopping for one isn’t always so easy. There are many things to take into consideration when looking at mortgage options such as rates, fees, credit scores, types of loans and negotiation.
The first tip we can give you is to shop around. Looking at many options can end up being stressful, so don’t look at too many options, but also, don’t settle on the first lender. Specially when that mortgage is going to be used to finance your dream property abroad. However, there are some easy ways to make sure your experience finding mortgage runs smoothly once you’ve taken everything into consideration.
Good Credit Score
Having a good credit score is essential for obtaining a mortgage. No bank or lending institution will lend money to someone who has a bad reputation for not paying back their current debt. You can – and should – check your credit score online at any time. Lending institutions will go through your credit history with a fine-toothed comb and nothing goes past them. Make sure you are building up positive debt and paying it off on time. This will allow you to get the best interest rates and a better mortgage offer.
Expert financial planners advise you to check your credit score with quite some time before even considering a purchase. That way you have time to increase your score if need be. You can check your credit report once a year for free. Constantly checking it also helps you fix any errors that could affect you when shopping for a mortgage.
You can get pre-approved at the bank for how much they are willing to lend you. This will help you set up a realistic budget before you start looking for a new place. You can get pre-approved by submitting all required documentation to the bank. Most require pay stubs, tax returns and other legal documents. Make sure to check with your specific desired bank institution to see what requirements they ask for.
Pre-approval is important because it allows you to see the amount of money you’ll have at hand for your property. But it also helps you realize that you are in fact eligible for a loan. It’s important to note that pre-approval does not necessarily mean you will get the loan, but you are in the right path.
Find Your Lender BEFORE Your Property
This is quite an important one. You do not want to have chosen a home before knowing who will be lending you the money. This goes hand in hand with the pre-approval. If you build a relationship with your lender earlier in the process and get your pre-approval in time and form you will be able to put in a quick offer on any home you want.
By working ahead of time, you will have everything figured out by the time you start looking at homes. You’ll know your attorney fees, your prep fees, and any other extra costs. You will also know if your budget will be able to cover it or you will have to rake up from elsewhere. It also gives you time to negotiate rates and other perks with time.
Fixed-Rate or Adjustable-Rate Mortgage?
There are two main options when it comes to loans. Make sure you select the one that best suits your needs. You can choose a fixed-rate mortgage or an adjustable-rate mortgage.
A fixed-rate mortgage has a set interest rate that does not change throughout the life of the loan. You are protected from sudden increases in interest rates. This type of loan makes budgeting easier and the interest rate will be set depending on the term of the loan (15, 20 or 30 years). And remember, the longer the term, the lower the monthly installment but the more interest you end up paying off.
The adjustable-rate mortgage starts off with an initial rate lower than the fixed-rate interest. However, the longer the term of the mortgage, the more the rate rises and can surpass the fixed-rate. You can negotiate a pre-arranged adjusting frequency with your lender.
Don’t Settle for the First Lender
Talk to friends, family or coworkers who can provide knowledgeable and first-hand experience and information. When you meet with lenders, ask for a fee breakdown so you are aware of the different charges your loan consequently has.
Listen to what lenders have to offer. Many lenders will offer things to keep your business. You can ask for incentives, such as cashbacks during closing or discounts on certain fees. The first lender will give you a gateway idea of what to expect from following ones and then you can take an informed decision.
Negotiate your Rate
As mentioned before, make sure you listen to what they have to offer. Lenders are eager for business and will make deals to keep you around. This allows you some leeway to negotiate your rate to a certain extent. Ask lenders to explain the cons and pros of each mortgage loan and listen to their recommendations. Every mortgage should be unique and fit your needs.
Come prepared with a list of questions to make your negotiation easier. Make sure the lender tells you all the costs associated with the loan and check whether they can waive any of them. On any given day, lenders will offer different deals for the same type of loan for qualified customers. You can negotiate as much as you can to get the best terms. Once you are satisfied with a deal, don’t let it go.
The best way to go about shopping for mortgage is to be prepared for everything. So, make sure you follow the previous steps, but also do your due diligence. Be smart and be creative. Don’t expect this to be an easy and quick process, but the end goal is to get that dream home of yours in the paradise that is the Riviera Maya.
Reach out to us for further questions about financing your home in Playa del Carmen or Tulum.
And remember, at Top Mexico Real Estate…we make it happen!