New mortgage report may make you nervous about buying a home in Birmingham
Birmingham, Ala. —
Take a drive around Birmingham and you'll find plenty of homes for sale. A new WalletHub report may make you nervous to purchase one of these homes. It says Birmingham is one of the cities with the most over-leveraged mortgage debtors, saying the mortgage debt to income ratio is 494%.
But Dr. Stephanie Yates, the Director of the UAB Regions Institute for Financial Education at the Collat School of Business, says it's really not that bad. She explains this report compares everyone's median income to the median mortgage debt, but not everyone in Birmingham has a mortgage. "Means someone who has a very low income whose not ready to have a mortgage yet is lumped into that same pool."
Dr. Yates says the report actually tells a story about affordability. It lists Birmingham's median income as $22,728. Yates crunched the numbers and says on that income you could afford a home just under $109,000. According to WalletHub the median house value here is $86,800. So in Birmingham someone making the median income can afford more than the median house. "So Birmingham is doing ok," says Yates.
If you're looking to buy a house and want to be ok, Yates has some tips for making sure you can afford your mortgage payments. "Talk to a mortgage professional, see how much you can afford, maybe get pre-qualified and that keeps you from going down the wrong path, getting excited about something you can't afford." Dr. Yates says your monthly mortgage payments should only be 28% of your monthly income. She also says be careful about getting into an adjustable rate mortgage. She says people get into mortgage affordability problems with those types because the interest rates go up over time and so does your payment.