Buy a car before or after home purchase?

Question

My wife and I want to buy a house about the middle of 2008. Right now we only have one car that we use to commute to work and I also use the car to drive from site to site as a repair technician. We have heard both sides, but we don't know whether we should go ahead and buy a new car now or wait until after we buy our house. If we wait then we would probably buy one with cash. Which way is best? My parents say to buy a house first then buy a car, but her parents say the opposite.

Answer 1

AFTER. Major purchases can affect what and how much of a mortgage you will be approved for. ALWAYS MAKE MAJOR PURCHASES AFTER YOU BUY THE HOUSE. I have known people to lose their mortgage and not be able to buy the home they wanted becuase their credit changed before closing.

Answer 2

Under normal circumstances, making a major purchase on credit prior to buying the home makes it harder to be approved for a mortgage. Usually when you trade in a car, you end up with a higher payment, and in this case you say that your payment will be reduced by $100 per month. The reduction in monthly payment may actually improve your chances of the mortgage so in this case, conventional wisdom is not applicable. If you are going into a less expensive vehicle, the mortgage lender may see this as a sign of responsible financial planning. If you have already found the house and are waiting for a mortgage to be approved, do not buy a car. If you are planning on buying the home in a few months, make the car purchase now.

Answer 3

I say it all depends on how good or bad your credit score is. While is not recommendable to incur on major purchases and acquire new debts before you start your home buying process, getting a car can sometimes be the factor that makes you getting the house a possibility.

In my case I did not qualified for a home loan before I bought my car due to my poor credit history, but now after I bought my car and have been making faithful payments my credit rating has improved greatly and I now qualify for the mortgage I was looking for.

What I am trying to do now is to get a loan for more money than what the house would cost so that I can use some of it to pay the car off completely or pay the car and use it as equity to acquire the home loan.

It all depends on how good your credit is, and how much you're willing to spend on the new car. Either way it has worked for me to buy the car first, so sit down and analyze the pros and cons and choose the one option that is more comfortable to your pocket.

Good luck

Answer 4

Hands down, "BUY A USED CAR". You need to save as much money as you can to buy your house. You need something that is presentable as family transportation for the immediate future.

You will find that not having a car note will permit the purchase of the house to occur sooner than later. Also the purchase of the house will permit you to get a good deal on the car purchase when you buy a new one.

PS: In my case I got a $500 discount because I owned a car that was not of the same company as the one I was buying, eg Ford vs GM.

Answer 5

After. No big purchases should be made until after you have closed on your house. More people are pre approved for home loans get into escrow make a purchase on credit and throw off thier debt to ratio numbers. Do not buy a new car now, if you do you will be effecting your debt to income ratios which will effect your purchasing power. Unless you can pay it off before you buy the home. If you can't then you should wait.

Answer 6

How long have you been using one car? If this situation is working for the both of you, then get the house. However, you may have to put off getting a car until much later after the house has been financed.

You can pay off a car faster. Do what is best for you and your wife. Look into the finances of it all.

The costs to homebuying vs a car. You have closing costs, downpayment, appraisal fee, realtor fee, property taxes, home repairs, appliances to purchase, added utilities, etc.

With a car you have downpayment, financing for at least 2 yrs and no more than 6, taxes and tags, maintenance, fuel

I hope this help to put things in perspective

Answer 7

AFTER. When you apply for a mortgage, they look at your current debt to credit ratio. If you have a loan for a car with a $300/month payment, there goes $300 that could have gone toward a mortgage payment. If you can wait 1 to 1 1/2 years and pay for it outright, you need to wait. You would be surprised how much less of a mortgage you will be approved with an extra monthly loan payment.

Answer 8

If you buy a car first that payment will be considered and calculated into your ability to qualify for the house you want. Those qualifying procedures are pretty strict and may preclude you being able to qualify for the house you really want to buy. If you're able to hold out, it should be easier to buy your house. Good luck.
P.S. Ditto what someone else said there. If you own your house you'll get a better deal on the car.

Answer 9

If you think you can save enough to buy a car cash in one year, then buy the car now, it helps build your credit rating. Then when you are ready to buy a house pay the car off, that will give you another boost to your credit rating. A higher credit rating means better terms in your home loan. Also consider that if your one car breaks down, you are going to have lots of headaches.

Answer 10

Project what your debt to income(Monthly) ratio would be with the car purchase first and then the house. Do it the other way.

If you purchase the car first and your debt to income ratio with adding the mortgage is within the acceptable range, get the car first.

The ratio is normally in the 33 to 45 percent range. Can go up to 55 percent with excellent credit.

Answer 11

If you can wait and then buy the car with cash, wait.

If you are going to apply for a mortgage soon, it is best to keep your credit under control until you get the house.