And if you were already planning to sell
and move to a smaller home or a less expensive area
in the next few years, and you really want or need that
equity, then getting out before values drop could be
a smart move.
How stable is your income?
When it comes to making that monthly payment, your mortgage
is only one-half of the equation. You also want to look
at your income and job stability. If you work for the
only plant in town, and you suspect it might close,
that's important to consider.
If you had to trade jobs, would you have
to move? How likely is it you could change jobs or be
Does the family have one or two incomes?
What are your options if something happens to some or
all of the income?
How much equity do you have?
Equity provides a cushion if your home goes down in
value. If you bought at $200,000, you've been living
in it for a number of years, and it's now worth $300,000
on paper, you've got a little breathing room.
If you bought when market prices were
the highest, leveraged every cent to get into the house,
have only been there a short time, and prices are headed
south, then you're much more vulnerable. If you have
to sell, you may not get what you owe.
Any time you have less than 10 percent
to 15 percent equity in your home, "you're a little
at risk," says Ilyce Glink, author of "50
Simple Steps You Can Take to Sell Your Home Faster and
For More Money in Any Market."
"With the cost of a sale,
transfer tax, moving expenses, borrowing 90 percent
could mean you end up walking away with nothing in your
But if your equity level is closer to
15 percent to 20 percent, "you still have a little
bit of cushion," she says.
Even if you're a new homeowner, you don't
have to panic.
"There's not a lot you can do,"
says Guttentag. "You can't prevent the decline
in your equity. So as long as you have the capacity
to keep making the payments, you're OK."
What's happening in the local economy?
When talk turns to housing bubbles, remember: We don't
live in one big homogenous area, but many little communities.
"It's very uneven," says Retsinas.
"Nationally, home prices nominally haven't fallen
in 50 years. That doesn't mean they won't fall in a
particular area. Don't be swayed by the national number.
Look at what's happening in your area."
Analyze the neighborhood market,
says Glink. Are houses taking longer to sell? Are sellers
getting more than they paid? "That's key,"
she says. "One other thing to ask: How long am
I going to stay here?