Request a mortgage loan It is one of the most important financial decisions that a person can make in their life, due to the investment that buying a property represents and the period that the debt can last.
If you are in the process of request a mortgage loan, but you are afraid that your application will be rejected, have a bad experience or you have heard from people close to you about the journey that the process may involve, I share the five most recurring mistakes when applying for a mortgage.
The 5 most common mistakes when requesting a mortgage loan
Take a look at them, avoid them and achieve a more agile and successful process:
1. Not knowing your credit history
Before applying for a mortgage, it’s important to review your credit history and make sure you have a positive score. Financial institutions will evaluate this report to determine your solvency and ability to pay. If you have a low credit score, your application may be affected or loan terms may be less favorable. If you have a score above 660, the vast majority of financial institutions will lend you; if you have a score of 600 or less, you will have to go through a stricter analysis or you will be the focus of non-bank financial institutions —with a higher interest rate—.
2. Do not compare different mortgage credit options
It is crucial to research and compare different mortgage loans before making a final decision. Do not limit yourself to a single bank, institution or broker. The best thing to do is look for alternatives, verify the terms and conditions, CAT, interest rates, terms, monthly payments and requirements of each one. This will help you find the best option that suits your needs and will allow you to make an intelligent decision. Remember to consider the type of procedure —whether it is online or in person—, the speed of the process and the flexibility in the requirements. Among the multiple options, there are government entities (Infonavit, Fovissste, etc.), banks, fintech/proptech and SOFOMES.
3. Not adequately calculating your ability to pay
Make accounts and establish an amount. How much can you pay monthly? Consider your income, expenses, and other financial obligations to determine a realistic budget. Do not make the mistake of assuming that you can pay a mortgage based on the maximum amount that the financial institution offers you, this could lead to difficulties in the future. Think about your current expenses and those that may arise according to your life plans —for example, having a child, buying a car, etc.—. In accordance with the policies of most financial institutions, you must earn three times the monthly payment of your mortgage loan, approximately. For example, the approximate monthly payment for a loan of 1,000,000 is 10,000 pesos. According to the rule, you must prove an income of at least 30,000 pesos per month.
4. Not saving enough for a down payment and other start-up expenses
In addition to the down payment —which is equivalent to 10 or 20% of the value of the property—, there are other costs associated with buying a home, for example, notary fees. Not having an initial capital is a common mistake. Make sure you have enough savings to cover these payments and avoid financial problems that unbalance your economy. The notarial expenses contemplate the deed of the house, the fees of the notary who performs it, acquisition taxes and registration rights. The amount is estimated at 7% of the value of the property in CDMX; however, it is only possible to know the exact cost after carrying out an appraisal on the property.
5. Not reading and fully understanding the terms of the loan
Although this is not a factor that determines the loan, before signing any document, carefully read all the terms and conditions. If you have questions, consult your credit advisor. Remember that a mortgage is a long-term credit, review from the beginning all the concerns you have about insurance, commissions, penalties, advance payments, etc. To ensure that you are well informed, we recommend that you choose a financial institution that provides you with a personalized advisor in order to guide you throughout the entire process.
In addition to these errors, there are other factors that you should take into account. Going to the trusted institution where you have your money or credit card is always the first alternative; However, if you opt for it, you may miss out on other entities with a more complete, flexible offer and with better conditions. The important thing is to inform you of the different offers available in the market and the news that exist, if there are new credit options with more accessible requirements.
Bernardo Silva Bernardo Silva, graduated in Industrial Engineering from ITAM, has an MBA from Stanford University. His experience has allowed him to improve mortgage acquisition solutions.