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Thinking about getting a home and talked to two mortgage lenders, who gave me a ballpark of what I could be qualified for, considering my financial obligations etc. My down payment would be about 14% of the maximum purchase price, but I would like to go even a little bit higher on the purchase price. I want to get the financial matters in order before I officially get "pre-approved."
I have a used car loan that I am currently paying about $260/month for, and I am wondering whether it is a better idea to 1) refinance the car into a longer term and reduce my payments with the same interest rate (I have already paid 1/3 off the original loan already - I imagine it will drop to $150/month), so I will have a lower monthly payment on it OR 2) refinance my car and with cash out, which will not make the payments go down but I can use that extra money for the down payment, which can bring the down payment up another 1 or 2% based on current maximum purchase price OR 3) sell the car and have no auto loan, get some cash for down payment, then get a car again after I get the mortgage.
Now, 3) is obviously the best choice I think, and it will be a little hard for me, but I think for a short while I am able to deal with it So, if I only want to consider 1) or 2), which choice do you think will help me the most in qualifying for a bigger mortgage? Or do you think it probably won't make much of a difference since we are not talking about a huge amount of increase of the down payment/reduction in monthly payments.
I doubt Very much that you're going to get #2. Cars depreciate.
I've got a #4. How about paying off that used car loan and saving up some more money THEN buying the house?
Well, I basically need to move out of where I am right now, but the rental market of where I am moving to is going crazy. Rent is high and I could hardly get anyone to respond to my inquiry. My plan is to buy a place and get roommates, which solve my problem of not able to find a suitable rental and being able to build equity with the help of rent. Even if I get lucky and get a place, because the rent is so high, it will take me a while to save up another chunk of money to add to the downpayment.
Just talk to a lender, unless you are going to post your tax returns, income, credit score, all of your debt, on this forum, you will not get accurate information to "Get your financial matters in order." You have 14% down but you want to go to a higher purchase prices, your 14% can be 10% on a higher purchase prices or even 5% of a even higher, but without knowing your income and debt, or purchase prices, there is not enough information.
If you do sell your car to qualify for the highest loan possible, then buy a car and increase your monthly debt, you may not have enough cash to pay all of your bills. The first thing you should do is create a personal budget and work within that budget rather than try to qualify for the maximum loan amount.
Just talk to a lender, unless you are going to post your tax returns, income, credit score, all of your debt, on this forum, you will not get accurate information to "Get your financial matters in order." You have 14% down but you want to go to a higher purchase prices, your 14% can be 10% on a higher purchase prices or even 5% of a even higher, but without knowing your income and debt, or purchase prices, there is not enough information.
If you do sell your car to qualify for the highest loan possible, then buy a car and increase your monthly debt, you may not have enough cash to pay all of your bills. The first thing you should do is create a personal budget and work within that budget rather than try to qualify for the maximum loan amount.
Without disclosing too much on a public forum, I will just say that my financial picture is very stable with a high credit score so I am really not concerned about that part.
I am totally willing to forgo the car completely if I can live in a place that I like, and it is part of the reason I am moving into a city as I like to use the public transportation. I do have a personal budget, and that is what makes me realize I could maintain my budget whether I rent or buy. Either cases, I will be living with roommates, so I might as well be the landlord.
P.S. I have bought a house before, so I am aware of the possible risks/costs that associated with home ownership.
If you can realistically live without a car, I would sell it. Not only do you eliminate the car payment, you eliminate insurance and all the other costs of maintaining a car.
I would be hesitant about putting down only 14%, or esp. about pushing beyond that to buy a more expensive home with a smaller down payment. Also, when you are the owner, you don't have "roommates" - you are the landlord and have a different relationship, a different set of responsibilities and it is a different dynamic. That's something else to think about.
I doubt Very much that you're going to get #2. Cars depreciate.
I've got a #4. How about paying off that used car loan and saving up some more money THEN buying the house?
I actually did that after buying a place. Refinanced and turned a $4k loan to a $17k loan and put the $13k towards my mortgage.
The only thing to be aware of is that a) you need to make sure the rate is lower on the car loan if you're going to do this. Borrowing at 5% on a car to pay down a 4% mortgage doesn't make sense, especially since the mortgage interest is tax deductible. b) You need to make sure you can handle the increased monthly payment. Part of the reason I'm saving money is because while I owe the same amount of money, I'm paying off $13k of my original mortgage debt over 5 years instead of 30.
Unless you're going to hit the magical 20% number to wipe out PMI, I think this will hurt your monthly cashflow too much to be worth it.
Overall, I think refinance the car loan if you can to get the rate down, maybe push out the payment term if necessary, but I wouldn't do that unless you have to.
Personally I did these types of moves because while I was comfortable with the payment situation, I realized I could save long term by doing this. That said, I remain firmly committed to the fact that if you need to play these types of games just to afford the house, you're cutting it too close to the edge and things will likely go bad.
Option 3 will get you qualified on the larger mortgage.
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So, if I only want to consider 1) or 2), which choice do you think will help me the most in qualifying for a bigger mortgage? Or do you think it probably won't make much of a difference since we are not talking about a huge amount of increase of the down payment/reduction in monthly payments.
