A decade ago, the economy in this country crashed leaving many people in this country financially ruined. Many of the people who suffered the most were those people who bought homes and property during the housing bubble believing it would last forever. When the housing bubble burst those people who purchased homes from banks that offered 100% financing with little or no money down and no proof of income (stated income loans) were left with homes that were overvalued, leaving them owing more money than their home was worth. Many of these people ended up losing their homes and their jobs. Florida, including Miami was one of the hardest areas hit.
Although the country has recovered a good deal in last ten years, the recession of 2008 should have taught those investing in Miami Real Estate some invaluable lessons that can help us stay of a financial crisis in the future.
Lesson 1: Don't Borrow All the Money the Bank Approves For A Loan
One of the things that lead to last the financial crisis for many people was the offer of easy credit and taking out huge loans. You shouldn't take out a loan for all the money that a bank approves you for when purchasing a home in Miami.
While it is only natural for people to want to put down roots and buying a house is the first step in accomplishing that goal, taking out a massive loan and committing yourself to mortgage payments that will take most of your income for the next 30 years is not a good idea.
Before deciding to buy a house in Miami you need to factor in all of the costs associated with owning a home including utilities, taxes, repairs, improvements, your mortgage and interest rate. If your housing expenses are going to total more than 30% of your income then consider waiting until you are in a better financial situation.
The more you can save towards a down payment, the less money you will need to borrow, and the more in interest you can save. We highly recommend a down payment of at least 20% of the purchase price, if not more.
Lesson 2: The Less Credit You Have the Better
Before the financial crash, getting credit was easy, leading people to buy the best of anything and everything from their homes to cars and a number of other luxuries. The idea of instant gratification became a way of life with many people forgetting that payment for all these things were going to come due with large interest payments. When people began experiencing job losses and lower incomes, they simply had no money to pay their debts, no emergency funds, and no way to pay that expensive Miami Real Estate loan resulting in loss of not only their income, but their homes as well.
Lesson 3:Don't Make the Mistake of Buying Your Child a Home or Giving Them A Down Payment
As a parent you want to help your child out if at all possible. For those parents that can afford it that often means purchasing a home for their child or at least giving them a down payment for a home they want. A better idea, may be to actually loan your child the money to buy their home in Miami and have them pay you back.
A loan requires repayment, and will not only teach your child to live within their means, but since you are the parent you can design the loan so that your child has lower mortgage payments, pays less interest and can afford a better home than they might otherwise be able to get on their income. It will also allow them to save some of their income should things get financially tight. Since your child will be repaying the loan, you will have some income should another financial crisis hit to keep your head above water, help your child through their financial difficulties, or help send the grandchildren to school.
Heeding the lessons from the past will help you to avoid any future financial crisis in Miami.
Miami Real Estate Official of EWM Realty International are local specialists who work on providing the latest local information. If you would like to buy or sell in Miami contact us today at 305-968-8397 or send us a message here. We specialize in the Miami Real Estate market and our knowledge in the area has helped countless of our real estate clients.