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Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

First time buyer questions

I'm 31 and am going to be purchasing my first car.

 

45-50k a year depending on overtime.  I have been employed at the same employer for 7 years.

 

Excellent credit history.  Credit score in the 740+ range.  I have 7-8 years of flawless payment history on my credit cards.  Credit utilization is 5-7%.

 

I'm curious about what exactly I'll be able to get qualified for as a first time buyer.  I didn't realize there was a stigma behind it.  I was looking for a car in the 28-29k range, with 10-15% down. 

 

Is this a naive expectation?


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
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Established Contributor
SamsungHDTV
Posts: 517
Registered: ‎10-25-2011

Re: First time buyer questions


sdotlow wrote:

I'm 31 and am going to be purchasing my first car.

 

45-50k a year depending on overtime.  I have been employed at the same employer for 7 years.

 

Excellent credit history.  Credit score in the 740+ range.  I have 7-8 years of flawless payment history on my credit cards.  Credit utilization is 5-7%.

 

I'm curious about what exactly I'll be able to get qualified for as a first time buyer.  I didn't realize there was a stigma behind it.  I was looking for a car in the 28-29k range, with 10-15% down. 

 

Is this a naive expectation?


You'll be fine, you should get a great rate. I think you should get a rate of 2% give or take. I wouldn't take anything higher than 3%. 

 

Make sure you research how to negotiate the car price, and what to expect in the finance office of a dealership.

I'm a personal banker and do a lot of auto loans serving the Houston area.
I suggest first time car buyers to read the sticky guide in the auto loan section.
I try to check these forums often, but if I missed your post, please feel free to message me with a link to it.
Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

Re: First time buyer questions

Another question(s)...

 

So I called a couple CU's yesterday, and the one I am a member of didn't have any first time car buyer restrictions (example: 20% down, 50% of Annual Income, etc.).

 

I asked what the credit score required to get the best rate was and was told 740, which I should have (2.5% APR).  I asked how they determine loan approval amounts, and was advised it's mostly based on credit score and DTI.  That being said, I've doing research and it's standard that below 36% DTI is solid.

 

1) Can I expect to get a loan up to 36% DTI?  I'm currently at about 17% DTI, so I have 19% to play with.  The car I would want would put me at around 32-33% DTI.

 

2) Right now my total credit limits combined on all cards is $14,600.  I have a balance on one card that is $3400.  I'll have $2200 in my bank account tomorrow.  I'm debating whether to apply this to my credit card, to bring my ulitization down, or to save it to apply towards a down payment.  Which option would look better to the lender?


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
BankAmericard Cash Rewards - 10k, MAFCU Visa Rewards - 10k, Chase Freedom - 2500, Discover IT - 2000, Barclay Apple - 2000, AMEX BCE - 2000
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Contributor
Hoya08
Posts: 98
Registered: ‎06-05-2013

Re: First time buyer questions

[ Edited ]

Banks usually limit the amount of loan extended to a borrower based upon the borrower's DTI ratio.  And if you weren't aware, banks don't use your entire CC balance to determine DTI, they use the monthly minimum payment due.

 

In your scenario, annual income of $45,000, loan of $29,000, and $0 down payment at 2.5% APR for 60 months, you monthly payment is around $515.  The car payment is approx 13.7% of your monthly gross income.  

 

So if you have 19% to spare, you should not have any issues qualifing for the entire loan amount should you decide against a down payment.

Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

Re: First time buyer questions

I was hoping to shoot for the 66 Month loan (which they offer) @ 2.5% APR, which should help mitigate any possible DTI issues.  Car I was looking at I'd be looking at 30-31k loan.  $2250 in rebates and 1500 down.  I plan on making additional larger block payments on the principal when my overtime ramps up in the fall, so I get out of an upside down position on the loan.


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
BankAmericard Cash Rewards - 10k, MAFCU Visa Rewards - 10k, Chase Freedom - 2500, Discover IT - 2000, Barclay Apple - 2000, AMEX BCE - 2000
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Frequent Contributor
tonyjones
Posts: 461
Registered: ‎04-22-2013

Re: First time buyer questions

What is your current DTI? That usually determines how much you can handle, loan amount and length.


Gardening Since July 2014
   
Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

Re: First time buyer questions

My current situation...

 

45k Annual (per my W2 last year, it will be higher this year).

 

Minimum payment is probably $25 on a 1k out of 7400 credit card balance, 14600 total credit on all cards.

 

My rent is $680 a month.  This is half of my apartment with my fiance' paying the other half.  I don't need to include the entire rent payment in my calculation do I, because this would result in my never getting a car.

 

Assuming $680 in rent (which is what it's been for the past 5 years), my DTI is 18%.  Leaving another 18% open to the 36% point at which (I believe) lenders want you to be at.


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
BankAmericard Cash Rewards - 10k, MAFCU Visa Rewards - 10k, Chase Freedom - 2500, Discover IT - 2000, Barclay Apple - 2000, AMEX BCE - 2000
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Frequent Contributor
tonyjones
Posts: 461
Registered: ‎04-22-2013

Re: First time buyer questions

I think you are fine, have you applied yet?


Gardening Since July 2014
   
Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

Re: First time buyer questions

Nope I have not applied yet.  I'm waiting for clarification on whether or not I need to include my entire lease in the DTI, or just the portion I'm responsible for, ie. half the rent.

 

I'm also waiting for my credit card to report to the credit bureaus.  My statement closed out on the 12th, and it's still yet to post to MyFICO ScoreWatch or CreditKarma.  The ScoreWatch credit simulator is saying my credit score should be 740-780 after the payment hits, so I'm hoping it will be over the 740 mark to get the 2.5% APR.  I've spoken with the CU and they use EQ FICO for their scoring system, no auto enhanced.

 

So watching my Scorewatch and waiting.  I might idle until next month to have additional downpayment, but apply for the loan the end of June due to the APR offer not being offered after the end of June.

 

I'd really like to know if my DTI is calculated with just MY portion of the rent, or the entire full rental lease, which I only pay half of.  If the later, I'm in trouble!


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
BankAmericard Cash Rewards - 10k, MAFCU Visa Rewards - 10k, Chase Freedom - 2500, Discover IT - 2000, Barclay Apple - 2000, AMEX BCE - 2000
Gardening as of 6/28/13
Established Member
sdotlow
Posts: 82
Registered: ‎05-06-2013

Re: First time buyer questions

So an update...

 

Because both of our names are on the lease, I'm only obligated to put half on.  Looks like I should be in decent shape when my FICO score updates.  I'll post if any more questions and when I apply for my loan with the results.


Amex CS scores - EX-745 / EQ-745 / TU-767 (6/28/13)
BankAmericard Cash Rewards - 10k, MAFCU Visa Rewards - 10k, Chase Freedom - 2500, Discover IT - 2000, Barclay Apple - 2000, AMEX BCE - 2000
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