Changes after mortgage pre-approval (insurance, loan, credit card, upfront)

[Smokipenelope]

Hi -

I'm in a bit of a panic over something and hoping someone familiar with mortgages can help me feel better.

I've been pre-approved for a mortgage on what will hopefully be my first home. I've heard from friends (and read on the forums) that you never want to do anything to change your debt to income ratio, so I've been very careful with my credit cards, spending, etc. Unfortunately, I've been put in a situation where I may not be able to help having more debt - in this case, a new car, as I was in an accident and my car may be totaled. I won't know until Monday.

I suppose I have two questions. If I buy a car, am I looking at mortgage brokers rescinding my pre-approval? I'm able to afford a car payment and the mortgage payment, I just have not had a car payment in quite some time as I paid my car off in 2003. Second, say I do have to get a new car - a friend is telling me to lease the car, and that it will then not be seen by the mortgage co. That just sounds fishy to me.

Thanks for listening.

[Daddys///M3]

A lease will absolutely show up on your credit report. Unfortunately the new car payment will have to be factored into the debt to income ratio. Be upfront with your broker and let them know what happened. Tell them what kind of car payment you are expecting monthly (and stick to it as much as possible) and have them run the numbers again. This does not mean that you won't be able to buy a home though, you may or may not have plenty of room with your total debt to income ratio. Of course without the info I couldn't say either way. Whatever you do, do not try and skirt the issue as it will come up whether you want it to or not.

[chet everett]

Insurance? Hope it covers a rental. You should be on the phone with your mortgage company NOW. I suspect they will tell you not to spend a DIME more than you have on hand, if have to borrow or commit to any things that shows up on credit report (AND LEASE DO SHOW UP!) unless you want to see your potential to borrow SIGNIFICANTLY reduced. If the car is a total loss there ought to be some sort of settlement from the insurer-- with car sales down there are some fine values in used cars, plan on going cheap -- it should help put in the mindset to get a bargin property too.

[Smokipenelope]

Thank you for the advice, I did think a lease would be considered and I appreciate having that confirmed!

I do have insurance and it is paying for a rental car. The problem is my car is from 2000, and despite its condition (pretty good), the damages to the car may cost more than it is worth, in which case I've been told I'll get a check for the value.

I do have options other than a new (or used) car that I can consider. My parents are considering getting a new car in which case they'd give me their old one (I feel WAY too old for this but it is a very nice gesture). I am also buying the house with my significant other, though since we will not be married before the house purchase I plan to keep it in just my name with him renting from me (better safe than sorry). Worst case we could buy together to keep the house, though that is still out of my comfort zone.

[HappyTexan]

Originally Posted by Smokipenelope

Thank you for the advice, I did think a lease would be considered and I appreciate having that confirmed!

I do have insurance and it is paying for a rental car. The problem is my car is from 2000, and despite its condition (pretty good), the damages to the car may cost more than it is worth, in which case I've been told I'll get a check for the value.

I do have options other than a new (or used) car that I can consider. My parents are considering getting a new car in which case they'd give me their old one (I feel WAY too old for this but it is a very nice gesture). I am also buying the house with my significant other, though since we will not be married before the house purchase I plan to keep it in just my name with him renting from me (better safe than sorry). Worst case we could buy together to keep the house, though that is still out of my comfort zone.

Take the car from your parents. You'll have plenty of time in the future to "pay it back" to them. That new or used car can come later if owning a home is your top priority.

[allforcats]

Originally Posted by Daddys///M3

Be upfront with your broker and let them know what happened.

Absolutely perfect advice! -- and TELL YOUR BROKER **NOW**, don't let your broker find out when she pulls a credit report on you a long time from now.

[allforcats]

Originally Posted by Smokipenelope

they'd give me their old one (I feel WAY too old for this but it is a very nice gesture).

PRIORITIES: What's more important to you, your very real financial situation or some very arbitrary definition of "old"?

I plan to keep it in just my name with him renting from me (better safe than sorry).

Very wise decision!!

[Smokipenelope]

Its not so much that the car is old (its from the last 10 years - not like its falling apart and the repairs will cost an arm and a leg), its more that I hate taking what feels like "charity" from them when I'm almost 30.

[JHusseinMoore]

Originally Posted by Smokipenelope

Its not so much that the car is old (its from the last 10 years - not like its falling apart and the repairs will cost an arm and a leg), its more that I hate taking what feels like "charity" from them when I'm almost 30.

Uh...hello? How do you think so many huge business and corporations get started? What you call charity, others call donations or investments in your future. Don't tell me you fell for that "boot straps" crap we heard about in school as kids. I drive a 1989 car that my parents bought for $500. You know what I am? GRATEFUL. Try it sometime.

[Daddys///M3]

Originally Posted by JHusseinMoore

Uh...hello? How do you think so many huge business and corporations get started? What you call charity, others call donations or investments in your future. Don't tell me you fell for that "boot straps" crap we heard about in school as kids. I drive a 1989 car that my parents bought for $500. You know what I am? GRATEFUL. Try it sometime.

Wow. So personal responsibility and self reliance is a bad thing in your eyes? Of course there is nothing wrong with the parents wanting to help out their child, but your tone is a bit wrong. It sounds like you are chastizing someone for standing on their own two feet.

Just so you know, most large companies get started by either a very large cash investment from the principal, a very large loan from a bank, or a very large cash investment from a group of partners. They certainly don't get started by "donations".