Budget Tuning®: How to define the budget for buying a property
- May 1
- 3 min read
Today a client called me who was interested in one of the apartments we offer at www.metroplex.mx . We talked about its features, and when we got to the topic of price, I asked him if it was within his budget and he told me that he didn't have a defined budget yet, that he was exploring options to see what he could buy.
The paradox is that this client didn't actually know how much he could allocate to buying his property and was exploring blindly . This is more common than you might think, believe me.
The most powerful tool when negotiating a price is knowing what our budget is and how we are going to pay for this property.
There are several ways to calculate how much we will need to invest in buying our property. We will need to consider several factors:
Personal funds: This refers to the resources we have saved, the cash we can contribute towards the purchase price (either partially or entirely). It's recommended to have at least 20% of the property's value as personal funds. This is the first indicator of the total value of our new home.
Bank loan: This is the most common form of financing on the market. It's very common to receive letters from our bank telling us we have a pre-approved loan for a certain amount, and most of our clients take it as a given. The truth is, the loan will only be confirmed once the bank has reviewed all our background information, income level, and debt. It's very important to consult a mortgage broker who can advise us and help us process this loan. We shouldn't start looking for a property until we're sure how much the bank can lend us.
We can get a very general idea of how much the bank would lend us, based on these criteria:
Income: Banks typically require proof of net income of between $25,000 and $30,000 pesos for every million pesos borrowed. For example, if you need a loan of two million pesos, you will need pay stubs or checking account deposits totaling at least $50,000 pesos.
Monthly payment: Banks typically require a monthly payment of 0.010% of the loan amount. In our case, with a $2,000,000 loan, the bank will require a minimum monthly payment of $20,000. We should assess whether our finances can support this payment. Conversely, if we decide we can pay a maximum of $15,000 per month, the loan amount should be $1,500,000.
In summary: the value of the property I'm looking for is the sum of my savings plus the mortgage I can obtain. In this case, I can borrow $2,000,000 (80% of the value) and should have a minimum of $500,000 in savings (20%), giving me a total of $2,500,000 to invest. We should also consider that we'll need an additional 7.5% for closing costs.
However, the best course of action is to consult a Property Coach® who can help you assess your creditworthiness. At Metroplex Real Estate®, we offer Budget Tuning® , a service with the necessary financial tools to create this profile and determine the value of the property you wish to purchase.
I want to do my Budget Tuning®, what should I do?
Call us: +52 55 4174 6906, info@metroplex.mx
A Property Coach® will contact you shortly.
