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Updated over 4 years ago on . Most recent reply

MARKET CRASH - Thoughts?
Let me start off by saying that I am no means making an excuse to not invest in real estate. I am actually looking to make my first purchase (house-hacking) within the year. Here is what triggers me though:
My full-time job is in the Mortgage industry, and on a daily basis, I see home-buyers getting themselves into loans with little to no money down leaving them with barely any equity in the property. In my honest opinion, I believe that we are in a personal debt bubble (credit cards, student loans, car loans, etc) because of people over extending themselves credit wise.
Let me show you an example:
Average Joe wants to buy a home for $200,000 putting 5% down:
His income Pre-Tax is $4,200 monthly ($50,400 annual)
The column in the picture on the left represents how mortgage companies qualify somebody for a conventional loan - in this case, Joe's max Debt-To-Income ratio is 46%. On the right however exemplifies Joe's real life monthly expenses vs his AFTER tax income leaving him with a Debt-To-Income ratio of 122%! (Sorry for the bad handwriting!)
If a market crash is upon us and home values see a major decline, my worries are that myself, along with many others are going to be underwater on their mortgages. Is now a bad time to buy? Or does if you find the right deal under market value, should you be safe?
I don't say this to scare anybody or drum up drama, I simply want to know others thoughts on buying in today's expensive market with little equity.
Cheers!
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“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch
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