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A Nation of Overleveraging

Homebuyers in San Luis Obispo, California, may be out of their league. According to the 2017 Home Overleverage Report, released Wednesday by WalletHub, the West Coast town is the currently most overleveraged city in America.

The Home Overleverage Report, which measured median mortgage balances against the median income and median home value of the city, found San Luis Obispo homeowners are the nation’s most overleveraged, coming in with an “overleverage score” of 59.52.

The cities homeowners have a median mortgage debt of $333,000, a median income of $16,565, and a median house value of $546,200. Their mortgage debt-to-income ratio is 2,014 percent and a mortgage debt-to-house value ratio of 61 percent.

Following close behind on the list were Williamsburg, Virginia; Brooksville, Florida; Bay Point, California; Willis, Texas; McKees Rocks, Pennsylvania; Ellensburg, Washington; Dumfries, Virginia; and North Fort Myers, Florida.

The impetus behind these overly ambitious cities? According to WalletHub’s Richie Bernardo, it’s the nation’s low mortgage rates.

Mortgage rates are still hovering at historic lows,” Bernardo wrote, “which could tempt the most impulsive consumers into purchasing a home much sooner than they can or should.”

But all hope isn’t lost. According to Edward Nelling, Professor of Finance at Drexel University, refinancing is a good option.

Homebuyers, he said, “should seek to refinance their mortgage, if lower rates are available. Depending on their lender, they may be able to negotiate alternative payments. In extreme cases, they should consider selling their house.”

Before going to the extremes, though, Norman Miller, Professor of Real Estate at University of San Diego, advises homebuyers should talk to their lenders.

“Unless you have lost a job or have a medical problem, don't just walk away from a mortgage,” Miller said. “If you did suffer a medical problem or job loss, talk to your lender. They may be able to work something out, especially if it is a portfolio (in-house) loan and not a GSE loan.”

About Author: Aly J. Yale

Aly J. Yale is a freelance writer and editor based in Fort Worth, Texas. She has worked for various newspapers, magazines, and publications across the nation, including The Dallas Morning News and Addison Magazine. She has also worked with both the Five Star Institute and REO Red Book, as well as various other mortgage industry clients on content strategy, blogging, marketing, and more.

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