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Where are the Most Overleveraged Mortgage Debtors?

market-studiesHomebuyers often bite off more than they can chew when purchasing a home which can place them into mortgage debt due because they can no longer afford the home. See which cities host the most overleveraged borrowers.

A study from WalletHub found that although purchasing a home typically equates financial growth or building wealth, sometimes borrowers overestimate their ability to pay the loan back.

"Not only are property values at the mercy of the national economy and local housing markets, but our financial circumstances can also take an unexpectedly downward turn at any moment, the report stated. "And without a financial safety net, we risk biting off more than we can chew as well as reshaping our long-term goals into short-term realities."

Although mortgage rate are nearing three-year lows , which should mean lower, more affordable payments  and larger loan amounts, "such an attractive combo is bound to tempt the most impulsive of us into owning a home—and perhaps one we can’t realistically afford—much sooner than we can or should," WalletHub said.

WalletHub’s analysts determined which cities are home to the most overleveraged mortgage debtors by comparing the average mortgage balances against the median income and median home value in each of 2,521 cities.

The city with the most overleveraged homeowners is Hamtramck, Michigan with a score of 59.4 out of 100. Here, the average mortgage debt is $120,286, the median home value is $39,800,  and the median income is $18,845. In addition, the average debt-to-income ratio is 638 percent and the debt-to-house ratio is 302 percent.

"Before diving in to the deep end of real estate, it’s advisable to polish credit reports and maximize credit scores to qualify for the best possible rates," WalletHub explained. "It also helps to leverage a Mortgage Calculator to gauge the size of payments finances will allow and the timeline for paying off [a] mortgages, whether borrowing for the first time or refinancing an existing loan. Otherwise, [they] risk overleveraging [them]selves, as is the case for homeowners in many cities throughout the U.S."

WalletHub's Most Overleveraged Cities

  1. Hamtramck, Michigan
  2. San Luis Obispo, California
  3. Beverly Hills, California
  4. Brooksville, Florida
  5. McKees Rocks, Pennsylvania
  6. Bay Point, California
  7. New York, New York
  8. Santa Barbara, California
  9. Kailua, Hawaii
  10. Greenwich, Connecticut

Click here to view the full report.

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