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Am I shooting too high?

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omar51o
Member

Am I shooting too high?

Credit Score: 655 EQ as of 12/31/13 (possibly higher due to paying off credit cards)

AAoA: 3 years 4 months. (Including credit cards im an authorized user on)

# of positive trade lines: 1 cap1 ($500 limit, 0 balance, 1 90 day late 1.5 years ago), 1 cap1 ($800 limit, 0 balance), 1 credit one bank ($500 limit, 0 balance). 2 authorized user BofA (16k limit, 2k balance and 7.5k limit, 0 balance), 40k student loans

# of negative trade lines: 4 unsettled charge offs from nearly 6 years ago

Income: 42k

Lenght of Employment: 9 months at current job, same occupation for 2 years. 

Previous Loan Experience: student loans only.

Debt-to-Income (DTI): $25 min payment on 1 CC, 

Year of Car: 2007

Miles: 32k miles

Purchase/Refinance: purchase $40k (private party)

Requested loan term (XX Months): 72

Down payment amount: up to 5k

Co-borrower/Co-Signer: would prefer none but possible

Other:

 

I will be graduating in 2.5 months as a Mechanical Engineer. I currently am an Intern and have been with the same company for 9 months and have a good chance I will be hired as full time employee. I love cars, and became an engineer because of it. I am willing to spend a good amount of money on a car that I will enjoy instead of being stuck with something that I don't. I had a rocky start with credit because I was given high limits when I was young and stupid and did not manage my debt properly (5.5-6 years ago). I currently have little to no payments and live at home with no rent. My student loans are deferred currently but will have a ~450 payment when active. The car that I am interested is priced under KBB and Nada Guides by quite some bit (82% LTV). So first question is what is the likelyhood of being approved for such high amount with no previous auto loan history and without a cosigner? Also if possible what is the likelihood of being required to put little to no downpayment? 

Message 1 of 12
11 REPLIES 11
Creditaddict
Legendary Contributor

Re: Am I shooting too high?

I don't think you can and I wouldn't dream of financing a 2007 for 72 months!!

 

Message 2 of 12
Creditaddict
Legendary Contributor

Re: Am I shooting too high?

Secondly you have absolutely no credit supporting you can handle a car loan at all let alone a 7 year old car... Let alone a $40k car!

 

I mean what is this car?

 

I'm sorry still realign with everything wrong here

Message 3 of 12
omar51o
Member

Re: Am I shooting too high?

2007 Chevy corvette z06. 32k miles. $36k. What would it take to get it? I don't want to finance any other car to build credit. Rather drive my current cars. 2-3 year goal is to build enough credit to buy a house.
Message 4 of 12
Creditaddict
Legendary Contributor

Re: Am I shooting too high?


@omar51o wrote:
2007 Chevy corvette z06. 32k miles. $36k. What would it take to get it? I don't want to finance any other car to build credit. Rather drive my current cars. 2-3 year goal is to build enough credit to buy a house.

Your still is whacked ven with nothing else at $42k income and that's not realistic.... 

i wouldn't suggest but you might get 50% DTi but you don't have other credit cards with nice high limits and history that show you can handle "possible" big payments, you don't even have a small auto loan to show on time consistent payments and then even though old until they fall off you have more baddies then good for credit it sounds like.

you could probably lease a 2013 corvette easier then Purchase this used one!

 

Message 5 of 12
Remember0
Valued Contributor

Re: Am I shooting too high?


@omar51o wrote:
2007 Chevy corvette z06. 32k miles. $36k. What would it take to get it? I don't want to finance any other car to build credit. Rather drive my current cars. 2-3 year goal is to build enough credit to buy a house.

Honestly, you don't need a car loan to help qualify for a mortgage. In your situation, I'll go ahead and say a car loan will hurt. Mortgages are much more strict with DTI than auto loans and if you have a car payment being accounted towards your DTI, it'll make it tougher to qualify especially given your income. Is the income you've stated annualized or are you expecting a bump when you start full time? Also is the 42k you have gross (before all taxes) or net (aka take home)?

 

@Others have said it but I think the biggest issue for you is DTI. (I don't know your current rent, but I'll impute $700...you can correct me if it's too high/low). 700+25+450+636 (35k auto loan @ a low 3.5% APR) = 1361

 

DTI=1811/(42000/12)=52%

 

It's already over 52% unless you find a lender willing to ignore the student loan payments because they are deferred at the moment. Also my assumptions are aggressive. At your FICO, you're probably looking at >6% and 700/month seems low to me (but I do live in the Northeast so it could be reasonable for you). Regardless, even pushing up my assumptions a bit will put you over 45% and it's not a prime deal due to the FICO/baddies.

 

If you REALLY want the car, I'd say larger down payment. And unless you increase your income, a mortgage will be very hard to get if you have that auto loan.

 

---

 

If you want a mortgage in two years, here's what I'd personally do:

 

Step 0) Forget  about the car for now. You can buy a nice car later (income higher and after mortgage). Also don't forget that full insurance on a z06 is going to be INSANE especially at a young age (I'm assuming you're <24), so add that into the budget.

 

A) Try and do a good will with COF to remove that 90 day mark. Write to the Exec office, highlight your good payment since then, state why it happened (some life circumstance maybe? unemployment, medical?), and try to get them to remove it. Also make sure those chargeoffs fall off after 7 years before you apply for your mortgage. If not dispute them as obsolete, they should be removed 7 years after your date of first delinquency (as long as you haven't made any payment, so don't make a payment without advice from an expert/experts on this forum).

 

B) Try to save for a down payment (you'll typically need 10-20%)

 

C) Your DTI ratio is a little tough here. Maybe the mortgage experts can chime in, but how much home are you looking to buy and what down payment do you expect to have?

Message 6 of 12
omar51o
Member

Re: Am I shooting too high?

First, thank you Remember0 for your thorough and clear response. I appreciate it.

 

So right now I make 42k pre tax. I also expect to get an increase in salary as soon as I get my degree in a couple months. Also I live at home right now and I plan on staying home until I buy a house in a couple years so I don't pay any rent at the moment. 

 

I can put down 20% right now but it really depends on what kind of interest rate I can get without it. 

 

Step 0) You are right, I really don't need the car and it definitly is a luxury. Im 25 right now and I really want to live a little before I have to settle down and become a responsible home owner and family man. 

 

A) I have contacted cap1 tons of times for them to delete that 90 day. They have said they will investigate it a couple times and told me to wait a month for response but they always end up with the same decision of correct reporting.  

 

B) got that. 

 

C) I havent gotten too much into the details but the market on the West coast is kind of sketchy right now. We saw a big increase in home prices last year but has slowed down since. 

Message 7 of 12
Remember0
Valued Contributor

Re: Am I shooting too high?

I'm also a senior about to graduate, so I definitely understand the wanting to have fun! Congrats on the (soon-to-be) accomplishment by the way!

 

A) Sorry about the cap1. Seems like a terrible experience, but it is their right to report it. If you ever see something else inaccurate about the account on your credit report, make sure you dispute it to try and get the account deleted. (There are better sections here catered to that, I'm not much of an expert on disputes admittedly.)

 

I think this entire scenario comes down to income and home prices. Assuming that you're going to need/want a mortgage in 2-3 years regardless of whether you have or don't have a z06, those are the two biggest things that'll come into play.

 

1. Where exactly do you expect your income to be after you graduate? What about 2-3 years after when you're going to try to buy a home?


2. What prices are the type of home you'll probably buy going for now? (realtor.com is a decent source)

 

I know there's no exact answer to 1 and 2. But homes aren't (hopefully) going to double every year, and conservatively (but realistically) estimate your salary...you know the industry you'll be working in. Why do I ask this? Well in 3 years if you're going to be making closer to 90k and looking at a home that goes for 200k today, I'll say you probably won't regret buying that z06. But if in 3 years your salary is at 60k, your potential home sells today for 300k, I can pretty easily say you'll regret the z06...it's hard enough to qualify for a 300k home on a 60k salary, the z06 would make it impossible. And odds are it won't be as easy as selling it because you'll likely be underwater (though probably not a LOT under).

Message 8 of 12
omar51o
Member

Re: Am I shooting too high?

1. I believe I'll be starting out at 75k. Hopefully jumping to other companies will net me a higher pay.

2. I have been looking at homes in the past year and Its hard to find anything decent under 300k.

In all honesty, I don't plan on keeping the car for more than a year. It's just something I want to get a feel for and get rid of. I really don't see values depreciating that fast as I have been tracking the market for these cars for nearly two years. I really want to take advantage of my rent free situation
Message 9 of 12
Remember0
Valued Contributor

Re: Am I shooting too high?

Okay, given those two things:

 

1) 75k
 and

2) You want this for the thrill and will likely get rid of it in a year

 

I'd say you can afford it and it won't stop you from buying a home in 3 years. As far as financing, your lowest APR will obviously come if you get a cosigner and put something down (may not need anything down with the cosigner).

 

It's hard for me to guess at what your APR would be to be honest. Since this is private party, I'd go and chat with a credit union/local bank and see what they can do...If they overlook those student loans, I'm guessing you can probably get something around 33k financed for 4-5 years with an APR of 8-10% by yourself. But that's a big if and this is a big shot in the dark (I'm not a lender). Maybe someone else can chime in with their opinion of what the terms would look like.

Message 10 of 12
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