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Will be looking to buy my first house starting next month or so, at least starting the actual search. I have no debt other then my car payment which is about 300 a month but only owe about 2500 on it total. How much of a difference should I be expecting when i get pre approved with and without paying off the car? The last time i was pre approved, about 2 years ago, was approved for about 360. Since then i make a few more dollars an hour but overall pretty similar. Currently my credit score is about 785 if that helps or matters.
Your credit score is in the excellent range but I don't think paying off the car is going to make much difference in how much of a loan you get approved for unless you have a great deal of cash in the bank where paying off the car doesn't make much of a dent in your cash reserves.
It also matters how your potential mortgage payment relates to your take home pay and expenses.
For example, a $360,000 loan at 4% for 30 years is about $1718. Add taxes and insurance and your payment and round it off to around $2000 per month house payment.
Whether it makes sense to pay off the car depends on your mortgage company's criteria regarding mortgage debt to net income and how much of a down payment you will make.
There are many variables to explore.
More important is how comfortable your financial situation is.
If your take home pay is less than $4000 per month and you only have a few thousand in savings you have no business borrowing $360,000 because you'll be on the verge of foreclosure and/or bankruptcy.
But if your take home pay is $6000 per month and you have $20,000 or $30,000 or more in savings then you are in a much better position for a loan like that.
All of the variables matter, not just the car payment.
Hold onto your cash for right now. The lender won't count the $300 against you since there is less than 10 months. You can always pay it off at any point, but talk to a lender first. If it needs to be paid, you can do so at closing.
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