September 05, 2019
Cities With the Most Overleveraged Homeowners
Generally here at Topouzis & Associates, P.C., we consider right now to be a good time to buy a home. But, as with all things, there are some places where the getting is better than in others. And one thing to take into consideration when looking to buy a home is where that home is located—and what the debt-to-income ratios look like in that place. The fact is that, when mortgage rates fall, as they’ve been doing, and when housing prices start to cool off, as has happened in recent days, people looking to get into a home can find themselves getting buy-happy—even if they aren’t actually quite ready to get on board the homebuying train, strictly speaking. Chalk it up to FOMO—fear of missing out on a favorable housing market. This can lead to new homeowners becoming overleveraged.
Generally, the best practice is to keep housing costs—mortgage payment, homeowners insurance, and property taxes combined—below 28 percent of a family’s pre-tax income.
Even the best housing market isn’t favorable if the buyer isn’t financially prepared to take the plunge. It is often the case that new homeowners may overlook the cost of repairs, maintenance, and upgrades to be done to a home, and get themselves in over their heads—placing them at risk of long-term financial stress.
In a recent report, WalletHub took a look at the states where people have the highest debt-to-income ratios, and what this means with regard to the housing situation in these places. The way the organization determined this was by taking the median income and median home value in over 2,500 cities, and comparing these numbers against the median mortgage balances in these areas. It turns out that among the most overleveraged cities in the country are McKees Rock, Pennsylvania, where the median home value is just $43,800, but the median mortgage debt is $115,499; and even worse is the situation in Kahului, Hawaii, where the median mortgage debt is $375,249, while the median income is a mere $39,279.
Whatever price someone pays for a home, it’s important they achieve clear title. At Topouzis & Associates, P.C., we perform title searches and remedy problems of title in Rhode Island, Massachusetts, and, importantly, Dunedin, Florida. We back these services with title insurance for both lenders and owners. Contact us if you’re considering purchasing a new property, whether for yourself or as an investment, so we can help ensure that you achieve true ownership of your property without having to deal with unforeseen hassles arising from problems created by someone else in the past.