Car Loan And Qualifying For A Mortgage

Car Loans And Qualifying For A Mortgage

Are you thinking about leasing or financing a vehicle in the near future? If you’re trying to qualify for a mortgage, you may want to hold off getting a car loan. Car loans weight heavily on your debt load. Why? Consider that a car loan represents another monthly expense. So if you’re trying to qualify for a mortgage, the more expenses your have, the less mortgage you will qualify for.

As an example, a young couple came to me recently to be pre-approved for the maximum mortgage amount. After reviewing all of their information, I concluded that they could afford a $350K mortgage. They asked why it was so low? I explained that they had $1100/mth in car payments. I suggested to this couple that they take $8K of their savings that was designated to the down payments, and rather put it towards paying off the 2 cars.

By doing so, this young couple could now afford a $480K home!

As you can see, car loans and other debts weigh very heavily on the mortgage amount you will qualify for.