Please help! I need opinions/experiences. I have heard conflicting arguments on applying for a home loan and making other simultaneous large purchases. I am planning to apply for a home loan in about 2 months. I would like to trade in a car that has 2 years left on payments for a new car soon, and asked the mortgage broker if that would impact my chances for a home loan. They said: "....as long as you don't raise your total $ payments, the length of the loan(s) does not matter. The only 2 things that might impact your home loan is if your current car loan is under 12 months we wouldn't include it in your debt ratio, and you may lose FICO points due to excessive inquiries." So my plan of attack is to first refinance car #1 which will lower my payments considerably, and then to buy a new car through Ford Motor Credit (who we currently have a perfect 3 year record with) and purchase an SUV. Total payments would be about $100 less than we are paying currently. At most I would have only 2 hard inquiries on my reports. Would this hurt my chances at getting a home loan with little down? Anyone have any experience with this? Help please.
Mike, Wait until you are in your home before you purchase or refinance the car. I'm no mortgage expert but from my experience these damn mortgage companies are so damn score driven it drove me nuts! I mean a couple points difference could me no mortgage or an extra point in interest, which could equate to a hundred dollars more a month in a mortgage payment. It just isn't worth it, when I was in the process I waited until I got into my home and then went our and bought a new jeep right on the spot. Just hang in there a little while longer, you will be glad you did. Others may disagree with me but I'd rather be safe then sorry. Good Luck! Tac
Thanks tac for your insight. How long did you wait before you purchased your new Jeep? Does the mortgage bank care about the how long it is? Thanks again.
tac & marci hit the nail right on the head: avoid any hard inq and/or new loans before you close on your mortgage loan. Even though it would benefit your front-end & back-end DTI ratio, it would be counterbalanced by the fact that you have additional inquiries, plus a new, untested loan. Untested in the sense that you will be as fiscally responsible with this one as you have been with the previous. Your car is in good shape, so it's not a real need. Even if it were old, I would have recommended that you replace it with a cheap car that you'd pay for in cash. In fact, it would be a better idea to pay cash for the car regardless of whether or not you're about to buy a house. Continually upgrading cars (SUVs are never a real need) and borrowing each time to do so, is a sure way to predict you'll never be out of debt.
I bought the jeep about a month after I was in my new home. The mortgage wasn't even reporting on my credit reports until 3 months later. My score was still the same as when I was approved on my mortgage, which was pretty good. When my mortgage hit, it raised my scores by about 20 points! Good Luck! Tac
cma You have gotten some good advice so far, but let me speak to you from a mortgage broker's view. Any time you are applying for a mortgage, the last thing you want to do is to cloud the waters and that is what applying for and/or refinancing a car will do. You are raising questions from an underwriter that will have to be answered. When I have a client apply for a mortgage, many times I will have them sign a form agreeing not to apply for any credit for any reason until the entire mortgage process is completed. I have also declined to obtain a mortgage for a client that refused to sign the form. I have seen the results of clients not following that advise...not getting the mortgage. fla-tan
Re: Re: mortgage & car loan @ same time? fla-tan, once again your advice is golden. Thanks for your help. My wife and I have decided all applying is out of the question until we do the mortgage. This group pushed me over the fence. Thanks again,
Re: Re: mortgage & car loan @ same time? Smart decision, Mike. Lenders want to trust in someone who has their financial cap screwed on right -- NOT a wallet-happy shopper who constantly applies for HUGE loan amounts (house + car = many individual annual salaries combined, that's a lot of moola.) The first signal from you to a lender that you're looking for more credit can do NOTHING but hurt your appearance to a lender. This does not impress them: "wow, they are out to buy all brand new things like rich people can afford!" That's not the impression you're going to make. You're more likely to make this impression: "Hmm, this couple want a house, but they just bought a car.... I believe I know where their priority lies, and their main one is not the house."
