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Here's our situation. I have a car with a car loan and DH owns his car outright. His car has a ton of miles and some issues and it's imperative that we both have a vehicle. We are considering buying a new/used car for me and passing my car over to him. However, we will be moving and buying a house in 9 months due to relocation. Will buying a car now affect our credit scores enough to affect rate when we buy a house? Here is some more information on us:
I haven't ran scores in awhile but last time I checked scores, we were both in the 760-780 range. I did run reports a couple of months ago to verify accuracy and we have absolutely no late pays or anything else negatively affecting our credit.
We have minimal debt. Other than our house payment and my car payment, we only have a couple 0% interest accounts that will be paid off in 6 months. We have recently paid off a good chunk of credit card debt.
We can easily afford the car payment and extra insurance.
We considered waiting just to see if his car makes it but if we do and we get in the situation to need a car just a couple of months before we are to buy house, would that affect us more than if we just go ahead and do it now? What if we wait and do make it till we buy the house? Will having a new mortgage keep us from buying a car?
I doubt you will have any issues. Your score is well over 700 and getting a car loan will probably only ding you a few points. Should not be an issue..I think your scores are high enough you could haggle over rates..you know you could always pay points to lower the rate but sometimes it's not worth it.
The bigger issue might be your debt to income ratios, which will affect your maximum home loan amount. Talk to a mortgage broker in the town where you are moving. They can assess your situation better than anyone.
If there is any question about your ability to get a loan with a car payment, do your best to eke out 10 more months on the current car so you can get your mortgage first. The car loan will be the easier of the tow.
i don't see why it would hurt you. you'll get a slight ding for the inquiry on points, but not anything that would change your stellar credit score to something less appealing. the only factor i would think is the debt to income ratio as NinaN mentioned. you have an added obligation for a monthly payment, which does, theoretically, effect your ability to pay the mortgage. i guess it depends on what are the issues with the existing car, are they issues that cause you concern that it can't be milked for 9 more months? i'd probably try to milk it just to be safe, though i feel as though it wouldn't hurt you too much getting the 2nd car, given your credit score currently.
Thanks for the responses! I've done a lot of number crunching. Even if we spend the most we are willing to spend on a house, we will be around 23% house debt to income. With our other bills (including the new car), we will be around 30% DTI. From what I understand, that is pretty good. I was just concerned that the new loan would ding us too much but from the sounds of it, it won't.
We will probably try to wait anyway. We've been waiting for so long so I guess a few more months won't hurt us. But at least I know that if we have to go ahead and do it, then we'll be okay THANKS AGAIN!!!!
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The rule of thumb is to not apply for anything within 6 months of mortgage shopping.
If you are not planning on mortgage shopping for 9 months then getting a new loan right now will give the inquiries and the new account time to age and for your scores to rebound.
If you think your DH's car will make it through the next 9-12 months then you might go ahead and wait. But if you think it's iffy then you should consider replacing it now rather than waiting for a few months.
When mortgage shopping you should try to have all of your credit cards but one paid off. With that one card you should try to have the balance at or below 10% utilization, preferably as close to 1% as you can get it. It's dumb but Fico actually dings you if all of your credit cards are at a zero balance.
If your debt to income makes it possible without strain to do that then its OK. But remmeebr that owning a home means more than just buying it.You will know if it is when you buy that car then figure buiyng that home, I'd want 20% down or not buy a home now days.Btter to wait a few years if you going to be paying too mcuh of income for that hoem and saving for a larger soen paymentto avoid high per centage and PMI.
The rule of thumb is to not apply for anything within 6 months of mortgage shopping.
If you are not planning on mortgage shopping for 9 months then getting a new loan right now will give the inquiries and the new account time to age and for your scores to rebound.
If you think your DH's car will make it through the next 9-12 months then you might go ahead and wait. But if you think it's iffy then you should consider replacing it now rather than waiting for a few months.
When mortgage shopping you should try to have all of your credit cards but one paid off. With that one card you should try to have the balance at or below 10% utilization, preferably as close to 1% as you can get it. It's dumb but Fico actually dings you if all of your credit cards are at a zero balance.
you don't have to carry a balance to not have a zero balance. as long as your statements have balances, that's reported in the FICO reports. so...if i charge $2,000 this month, and pay it off before my statement is generated...FICO sees $0. If statement is generated, and I pay it off by due date...FICO sees $2,000 and I don't pay interest. You gain nothing by leaving a balance, all it does is cost you interest.
for someone in the high 700s...a few point fluctuation up or done will change nothing in the mortgage costs/approval.
The bigger issue might be your debt to income ratios, which will affect your maximum home loan amount. Talk to a mortgage broker in the town where you are moving. They can assess your situation better than anyone.
If there is any question about your ability to get a loan with a car payment, do your best to eke out 10 more months on the current car so you can get your mortgage first. The car loan will be the easier of the tow.
I agree that it's not so much about the credit score as the debt to income ratio. An increase in your debt could potentially lower the mortgage amount for which you qualify.
The standard ratios for mortgages are 28/36, which means that the mortgage, taxes and insurance can't be more than 28% of gross monthly income, and mortgage, taxes, insurance PLUS all other debt payments can't be more than 36% of your gross monthly income.
Check out your total car payments plus your potential estimated house payment against these numbers.
So do I leave a minimum balance on my cards or zero balance.?? Came here because I just got a car loan wondering if I should apply for a house loan but I guess it looks like I should wait another year or so.
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THANKS AGAIN!!!!
