Surviving in a Slow Housing Market with the Right Florida Home Loan

What’s the worst thing that can happen to an owner during a slow housing market? Your Florida mortgage loan could exceed the value of your property. This is a danger a handful of individuals currently face, so let’s talk about ways to avoid it in your future.

1. Buy within your means
When Florida home loan rates are low, it can be tempting to make a low down payment or buy more house than you can afford. Be wary, though. This step makes you more vulerable if prices don’t appreciate as you had hoped because your equity isn’t very high.

2. Keep your loan-to-value ratio below 80 percent
Your mortgage principal, plus any Florida home equity loans you may have, should total no more than 80 percent of your home’s current value. Not only will this get you a better loan rate and remove the need to pay private mortgage insurance (PMI), but it also builds a healthy cushion if the value of your home drops.

3. Don’t buy and flip
Homebuyers may get into trouble if they plan to sell within a year or two because they’re not planning well. What if the market doesn’t recover by then? At least be open to the fact the remaining in your residence for at least five years is a possibility - and apply for the best Florida home mortgage given that fact.
4. Don’t stretch your home equity
A home equity loan (HEL) can be an affordable way to consolidate debt, finance a renovation or cover other large expenses. However, stretching your home equity too thin is risky if the market is stuck in a downturn.

5. Be wary of cash-out refinancing
Some owners dip into their home equity when they refinance Florida home loans, taking out a new mortgage with a higher principal and putting the extra funds toward a major purchase. However, just like taking out a home equity loan, this is riskier if a market upswing doesn’t take place in the near future.

6. Pay down as much principal as you can
The less equity you have in your home, the harder you’ll be hit as the real estate market drops. That’s why an interest-only Florida mortgage or option ARM brings higher risk: they do little or nothing to reduce the loan’s principle. If you’re buying or refinancing right now, consider a fixed-rate mortgage with a 15-year term. This will enable you to pay down the principal and build equity much faster.

Of course, overall, don’t panic. The housing industry isn’t overly strong at the moment, but swings are bound to occur. All that matters is the price on the day you buy and on the day you sell.