After getting a settled job, you must want to buy a house and car and secure your future. But it would help if you did not mix up those things. A house is a big investment for your future. So, it would help if you bought it first. But it is not true that You will have to stop your life and other demands just for buying a house. But after deciding on buying the house, purchasing a car is a big one. But if you want to go through applying for a mortgage and closing it on the home, you should reconsider your idea of purchasing a new car until the deal is finalized.
After getting a handsome salary in their hands, many people want to improve their social standing in front of their friends and colleagues. So, they want to buy a house and a car at the same time. It is obvious enough. But You must know that buying a car before purchasing a house can affect what the mortgage lender assumes you can afford to buy a home.
Should I buy a car or house first?
Buying a new house and a new car will both impact your credit score. If you want to make sure you qualify, go with the mortgage first. However, If you require a car to earn a living, you should buy a car first.
Car is a big item for buying. So, it naturally increases the ratio of your debt-to-income. From this, your lender will decide how much you can afford for mortgaging.
Should I pay off my car before buying a house?
Sometimes mortgage lenders may recommend paying off a car before buying a house to improve credit score. Paying off your car loan could lower your credit score and help you in house buying.
Above all, purchasing a car can reduce the amount that you can afford for your house.
Buying a house and car at the same time
Buying a house and car simultaneously can be a good solution only if a person can trade-in or sell the old car (used car) because that can not impact mortgage qualifying or the interest rate at all. Buying a car on credit right before some person buy a home can be the wrong decision because the additional debt can impact the debt-to-income ratio, reduce the dollar amount of mortgage dollars for which person qualifies, or increase the interest rate that person is charged. The common solution is to buy a house, close the deal, and then buy a car.
Here are some important things that you should avoid before buying a house. Buying a house is undoubtedly a big investment. So, you will have to put your step carefully if you plan to buy A HOUSE AND CAR AT THE SAME TIME.
It would help if you showed all the account statements that contain the liquid amounts or assets while your lender works to decide your eligibility and other criteria for the loan. You should not move the money between your various accounts before buying a car. Your lender may want to see the documents for these. So, it is a great idea not to move money between accounts unless you buy a home or complete the home loan process. If you do this, you may need to submit all the additional paperwork.
If you change your bank in between purchasing the home loan, you and your lender eventually deal with so much paperwork. So, it is a good idea not to change your bank until completing a home loan.
In the meantime, if you change your job, then it may create some negative effects on your home loan approval. You may need to submit your last two years of self-employment approval to process your loan. If you plan to change your job, then it is smart to postpone the idea until buying the house.
If you have a good credit score, then you should not go through a bad inquiry. But the additional application for a credit card may put you in front of the question about your financial stability to buy a home.
The best solution is to avoid big buying decisions until you get the loan approval for your home.
Should I refinance my car before buying a house?
Before buying a house, refinancing your car is usually unnecessary because car payments may not need to be factored into your debt-to-income ratios. However, in rare cases, based on car price and the number of remaining car payments, refinancing can be a good idea. You need to check with your licensed mortgage originator first your debt-to-income ratio.
After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management.
At Promtfinance.com, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification.
Read more on Daniel Smith's biography page.
Contact Daniel: daniel@promtfinance.com