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I have signed up to build a house which will probably ready by September. One of our cars got totaled recently and we need another car.
I have enough savings to put down 20% on the house and with the insurance money we got for the totaled car as well as other savings we can buy a new replacement car paying cash. But, then we may not have enough for our furniture etc.
If we buy a car now, will it affect our mortgage rate for the house we will be getting? Is it OK if I take a loan for the car?
I have a credit score of over 805. I don't want it to get dinged when I actually get the mortgage for my house.
Speak with your loan officer about this. Make sure your debt and income ratios don't fall out of line with the new payment. You need to make sure you have enough reserves required by the bank.
Your credit score will be affected by both, the purchase of the car and the house. However, you want to have the better credit score when buying the house rather than the car, because the loan amount is bigger for the house.
My suggestion is to take the money that you got for the totaled car and buy a car using that amount maybe a thousand more out of pocket. I would NOT go purchasing a new car or take a loan
Your insurance rate will go up on a new car. Your DTI will change if you take a loan for a car which I turn may affect your loan fir the house. Your credit is great but it's not the end all to a loan qualification calculation
If you can do both well within your means, it will have little impact on the loan. You can always check with the lender if you think it will have too large of an impact on your DTI or have too much effect on your reserves.
My suggestion is to take the money that you got for the totaled car and buy a car using that amount maybe a thousand more out of pocket. I would NOT go purchasing a new car or take a loan
Your insurance rate will go up on a new car. Your DTI will change if you take a loan for a car which I turn may affect your loan fir the house. Your credit is great but it's not the end all to a loan qualification calculation
This is what I would recommend. The unknown in this equation is interest rate. Unless you have huge room in your back ratio, I do not recommend you add to your debt load. And if you do, be prepared to pay it off if necessary and finance the furniture after moving in.
Thank you all for your advice. I guess, we should simply get a cheap car for now till we move into our new house. Depending on the reliability of the cheap car, we can then sit back, look at our finances and maybe decide on exchanging for a new car then.
It was really helpful to solve our dilemma, posting here. Thanks again.
Quote:
Originally Posted by SmartMoney
This is what I would recommend. The unknown in this equation is interest rate. Unless you have huge room in your back ratio, I do not recommend you add to your debt load. And if you do, be prepared to pay it off if necessary and finance the furniture after moving in.
I think it depends on various factors, including your income. But in my opinion, most cases, there won’t be a significant impact. Contacting a mortgage broker may help you know better. A few years back, my friend had a similar situation, where he had to buy a new car before getting a home mortgage. He talked with his mortgage broker at The Financial Forum in Toronto and in the end, he still got mortgage at a good rate. I have to say, both him and his wife are employed and they have a pretty good income, which might have helped them.
Thank you all for your advice. I guess, we should simply get a cheap car for now till we move into our new house. Depending on the reliability of the cheap car, we can then sit back, look at our finances and maybe decide on exchanging for a new car then.
It was really helpful to solve our dilemma, posting here. Thanks again.
Yeah. Cheap car to buy time until closing is good.
This thread is a year old. I'm sure OP made a decision.
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