My fiancee and I will be first-time home buyers soon. What effect will taking out a car loan right now have?

Question

Will it effect the interest rate we get, the amount we can borrow, or both?
Some extra facts of our situation:
- We are looking at buying in ~90 days.
- We are not concerned about the amount we'd be able to borrow; initial prequals are offering more than we want to spend.
- We can put down ~10%.
- We both have credit scores in the high 700s.
THANK YOU!

Will it effect the interest rate we get, the amount we can borrow, or both?
Some extra facts of our situation:
- We are looking at buying in ~90 days.
- We are not concerned about the amount we'd be able to borrow; initial prequals are offering more than we want to spend.
- We can put down ~10%.
- We both have credit scores in the high 700s.
THANK YOU!

Added after posting: Need to know very specifically Will the new car loan effect the interest rate we get, the amount we can borrow, or both?

Answer 1

Great question, because you covered all the details!

The good news is absolutely not, you are fine to buy a car. The other answers that you have been given (saying NO) are not specific to your details. I would say NO if you had bad credit, were buying right now, etc.

With credit scores in the mid-700s and ~90 days until you buy a house, there will be zero issues. If you have a mortgage broker already, ask if $_ in new monthly payment will affect the pre-qualification. If you don't already have a mortgage broker (just a credit union or bank), email me -

Caveat though: do not let 20 dealers pull your credit. Decide what car you want, do your own homework on pricing, etc. The dealer does not need to pull your credit to work a deal on the car. If he says he does, then walk away.

Answer 2

1

Answer 3

Here is where your loan might become a bit awkward,
First of all congratulations on your high credit scores.
You are not married yet but will likely buy the house as "joint tenants in common" An underwriter will place the highest wage earners credit score as the one used. Your combined income will qualify you but I would recommend that the one with the lower income buys the car if you cannot wait until after closing your home loan. Reason is the primary borrower on your home loan should not risk crowding the debt to income ratio. That could force the loan to go stated rather than full doc. There is a 1/2 point hit to rate usually attached to such a priveledge. You might be able to buy the car before the home and be just fine but as a safeguard have the lower wage earner or credit score do the car in their name and the other be first named on the mortgage and purchase and sale agreement. Do not allow the auto dealer to pull your credit. Take them a copy your mortgage lender has pulled. Only your lender that knows your total debt and income can accurately answer your additional info queery. I can remember over the years a lot of first time home buyers that were disqualified days before closing over a simple washer and dryer set they had bought. It isnt likely that would happen to you but dont risk a major purchase over a minor one if the car can wait.

Answer 4

Once you own the garage you can fill it with new cars, buying one before closing can prevent owning the home at all. Many people are in dire straits now from doing such but one cannot live in a car. A pre-qual is not the same as pre-approval and until you have a rate locked you are subject to market changes. Congrats on the great credit scores but dont buy a car and have to go stated and pay a higher rate. Go full doc and get a rate that will in affect soften your total payments once your financing a car.

I see now you have added a parts 2 and 3 to your question.
It appears you cannot take wait till you close escrow as an answer so to keep you in the "I'm totally entitled" club I will give you a couple car buying tips. Buy a 1 year old model that has just came off a fleet lease. You will save close to 17% off the new price and still be able to have the same as new warranty. You will see somewhere between 2-3 hundred per month as a car payment. Add in full coverage insurance of around 75.00 or so more than your currently paying and you can easily see why some here are saying dont buy the car first. Maybe they dont think you make 100K + per year, maybe they think your trying to buy a California house thats way overpriced to their way of thinking. Maybe they arent as experienced in lending guidlines as they should be. The bottom line here Kevin pointed out below, only your lender knows the real details and you should ask that person this question.

Answer 5

DO NOT BUY A CAR UNTIL YOU CLOSE ON YOUR HOUSE!

Buying a car is going to seriously impinge on your ability to buy a house. A bank will see 5 years of payments for what, $200-$300 dollars every month? That amount is an extra $50,000 you now can't borrow, which means the difference between getting a house or not.

Do some playing around with the financial calculators at www.dinkytown.net and you will see how seriously that car payment is going to damage you for buying a house. Wait until you close and give yourself a few months of paying a mortgage and dealing with the routine expenses of being homeowners before you add any new expenses.

Answer 6

Are you getting a conventional mortgaqge on your house, or are you getting Sub-prime?
Are you aware there is a housing meltdown in the US, Mortgage companies are going broke, People with subprime loans are finding big jumps in interest rates after initial teaser rates.
Defaults are mounting and prices are starting to drop.
Please read up on this stuff before you commit to a house now.

Answer 7

I bought my car a few weeks after I was approved for my mortgage. It did not show up on my credit report right away, so I was saved. I would say that you should wait, b/c it could affect the lenders decision.

Answer 8

yes it will have a significant impact, if possible it'd be MUCH better to wait or get something you can afford now