Will taking out a car loan hurt my chances of buying a house?

Question

My Husband and I are stil unsure of renting or buying right now...Its kind of complicated since he just got out of the military and we just moved back to MA across the country and are currently staying with my family. We always used one car because e lived on a small military base...now we NEED to cars because Im starting a part-time job and I have to small children...My husband also works a hour away 48 hours at a time! So a car is a MUST! I have money in my savings but im saving that for the house (we are using the VA Loan) Will it hurt us to take out a small auto loan for like $4,000? My husbands credit score is about 710...We also have no credit card debt at all....We have three cards but only charge gas and pay them off right away...And we have one car loan out thats a couple years old for $12,000. thanks!

Answer 1

It sounds like you'll be fine. Your total monthly bills (including rent or a new home payment) should not exceed 50% of your gross income; if you're below that, you'll be ok.

Answer 2

My husband and I are also looking for a house in MA right now. I will tell you what the bank adviser told us when we first started this process a few months ago. Don't take out any loans, new charge cards or charge any large amounts of money within 6 months of wanting to buy a home. Go to the VA, find out how much you are approved for in a mortgage and buy your house first. Right now in MA the market is a buyers one and if you put your mind to it you could find a suitable house in a week or so. Just make sure that you get a fixed rate, 30 yr mortgage and then get yourself a car. Maybe your husband could take the train and bus to work.

Good luck in your search and I hope your husband isn't as picky as mine has been.

Answer 3

You've just hit on one of my pet peeves...

If you're in need of a car, everyone knows the second you close the loan you're going to go out and get one. But they still act like you have no car payment when calculating your debt. But if you buy the car before you close, you're going to get hit with the payment.

Given your situation, you will probably not get hurt. But just in case, go to Enterprise and rent a car for a couple months, get the loan, and then purchase what you want. I know that sounds crazy, but it is the safer way for lending purposes. And it gives you the opportunity to try a car out for a couple months. (Many dealerships will rent you a used car for a couple months pretty cheaply. Check your yellow pages for "Auto - Rental."

I just lived through the same thing. I drove an eight year old car with a cracked windshield to my closing, but didn't have a car payment on my liabilites list. Bought the car a week later! I probably still could have gotten the loan if I had purchased the car ahead of time, but why chance it?

Answer 4

If you only have one car and no credit card debt, a loan for another car will only help your credit score. Your score is based on how much debt you have and how well you manage that debt. It won't hurt your chances if you have two car loans. Most married couples have two car loans and credit card debt. As long as you pay timely on the new car loan and establish a payment history you'll be fine.

Answer 5

Without knowing your current Debt-To-Income ratio, it is hard to say. If you are unsure, I would wait until you get the house. Get your credit report, add up all of the monthly payments, add your future house payment (including taxes and insurance) and divide it into your gross monthly income. You will need to be around 40%.

Answer 6

Depends on your income and current debts. Always smarter to buy the car after you get a mortgage.

Answer 7

With your limited other debt, you should be just fine.