ROCKFORD (WREX) — The housing market is hot right now. Mortgage rates are still near historic lows, and prices and demand are up. But buyers need to make sure they're not taking on more than they can afford.
"You simply are just not going to be making annually how much you're spending on a house so that makes sense," said Jill Gonzalez, an analyst with WalletHub.
Gonzalez said most people are overleveraged on their mortgage, but the problem is some people have a bigger gap than others between their annual income and mortgage.
"The higher that ratio is, that debt to income ratio, the less likely people are able to keep up with mortgage payments," she said. And that's what can eventually lead to foreclosure.
WalletHub released a new report about overleveraged mortgages across the country and which cities have the most homes that fall in that category.
"Being overleveraged is maybe a step on the way to being underwater. So it's not as severe, the credit implications are not as severe. It's certainly not the best thing," sad Gonzalez.
In the stateline, Belvidere has the highest percentile of overleveraged mortgages. It ranked in the 61st percentile with a mortgage debt-to-income ratio of 271%. Gonzalez said ideally the ratio should be below 200%.
Rockford is fairing much better in the 15th percentile with a ratio of 193%.
Freeport is even better off, landing in the 7th percentile with a ratio of 164%.
And Machesney Park ranked the best in the stateline, in the first percentile, with a mortgage debt-to-income ratio of 163%.
To see WalletHub's ranking of overleveraged mortgages by city, Click Here.
To see how overleveraged your mortgage using a mortgage calculator Click Here.