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Auto Loan Ruining Chance of Mortgage? (Resolution on Page 2)

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Anonymous
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Auto Loan Ruining Chance of Mortgage? (Resolution on Page 2)

My fiance and I have been planning on purchasing a house in the next month or so. I have been working on my credit, and have been saving up. Everything was going as planned, so much so that we had even picked out a house we wanted to put an offer on. She has her heart set on this one, and I am found of it myself, so the ability to get a mortgage is top priority. I was prequalified for the mortgage, which I know is worthless. I was set to get pre-approaved in the next few days, but my car just got totalled out. Is it going to be safe to get an auto loan of similar value, or will this completely botch my chances of getting my mortgage? I dont want to buy a cheap car I will hate, only to sell it in six months if I dont have to. I am planning on discussing this with my mortgage broker as well, I just wanted some quick input.

 

Quick Facts:

628 Equifax FICO (Score Watch Pull on June 20. This is also my bottom score, Equifax is the only one who has not yet dropped a disputed collection)

714 TransUnion FICO (myFICO pull, June 27)

$2800/Monthly income

Previous payment and only obligation of $395

1 Credit Card with $500 limit (balance $0)

1 Credit Card with $300 limit (balance $0)

1 Previous Auto Loan, payed today by insurance company, I made 7 of the 36 payments, all on time

1 Year with this employer, 1 1/2 year with previous

$3000 left for car down payment from insurance company

5% downpayment left for mortgage, plus reserves

Message 1 of 18
17 REPLIES 17
Anonymous
Not applicable

Re: Auto Loan Ruining Chance of Mortgage?

Sorry about the car. If I am reading your post correctly, you are saying your insurance company paid off the balance of the loan for the car that was totaled and you have $3000 left over.  If that is correct I personally would try to cash flow the car with the $3000. Also since the car payment (debt) is gone, your DTI ratio should look better.

 

But  if you really feel the need to have car payments, I would wait tell you close, I would not risk appling for a new loan at this point.

Message 2 of 18
Anonymous
Not applicable

Re: Auto Loan Ruining Chance of Mortgage?

Yes, I have $3k from the insurance company, after the loan is payed off. Is it the score I should be worried about, or the DTI? My DTI is relatively fine, since home prices are low ( we are looking at a 1200sqft 2 bedroom for $72k). Im not worried about the DTI, just the score element of it. Im in just about to order my TU score, for the sake of knowing.

 

I know I probably should, but part of me can not stomach even looking at cars that are $3,000 around here. Either the used car market has changed majorly lately, or I got to used to driving a new car, but everything looks like it barely runs. About the best thing I have found would be a retired police Crown Vic, which would be okay, I guess. Maybe if enough people tell me no reality will set in Smiley Sad

Message 3 of 18
Anonymous
Not applicable

Re: Auto Loan Ruining Chance of Mortgage?

...

Message 4 of 18
203bravo
Established Contributor

Re: Auto Loan Ruining Chance of Mortgage?

Have to echo everything that's already been said:::: everyone I've talked with has basically given me the same advice:

 

There are many new rules and stricter credit guidelines that continue to impact borrowers qualifications. While the borrower’s credit is pulled prior to application, many do not realize that the underwriter can, and in many cases, is re-pulling the credit of the applicant prior to closing.

So, your credit score at application is just as important as your credit score at closing. A change in credit score before closing could ruin or cause major problems or delays to your loan. Here are 8 of the most common items that could negatively impact your credit score during the loan process.

1) Do not apply for new credit
2) Do not pay off collections or charge offs
3) Do not max out or over charge your credit cards
4) Do not consolidate your debt
5) Do not close any credit accounts
6) Do not miss payments or pay late
7) Do not dispute any accounts on your credit report
8)Do not do ANYTHING having to do with your credit without first speaking with your mortgage professional!

Message 5 of 18
Anonymous
Not applicable

Re: Auto Loan Ruining Chance of Mortgage?

This was a huge no no a realtor stressed at our home buying class.  The realtor said he's had clients do this same thing and lose their mortgage loan.  Id wait until after you close on a house or buy a $3k used car.

Message 6 of 18
Booner72
Senior Contributor

Re: Auto Loan Ruining Chance of Mortgage?

I like the list of "do nots" but don't understand why not pay off collections?   A:  it will update the date?  B:  Awake a sleeping giant?   C:  All of the Above?  D:  Other?

 

 

ALSO

 

What if they pull your credit at the last minute b4 deciding, and find that your score went down a few points for the inquiry caused by the bank itself?  That's my biggest worry.  What if the score is just a few points shy? (not at the first but at the last pull).

STARTING: 11/24/10 EQ-584 EXP-648 TU04-595
CLOSED FIRST HOME 8/19/11 EQ-630 EXP-691 TU04-653
CURRENT: EQ-701 EXP-??? TU08-720
Message 7 of 18
ShanetheMortgageMan
Super Contributor

Re: Auto Loan Ruining Chance of Mortgage?

Getting a car means depleting your reserves and/or incurring debt payments.  If you still qualify with a payment, and if you can still qualify with less reserves, and your score doesn't take a dump from a new trade line (which you probably would lose a few points) then getting a new car loan wouldn't be an issue... but if disqualifies you, well obviously there is your answer in how it relates to you getting a mortgage.

 

How much of a home you are looking to buy, how much of a down payment you want to put down, and how much your debt payments are currently (I see $395 listed) would determine how much of a car payment (if any) and how much less in money you could have (if any) and still qualify.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 8 of 18
Anonymous
Not applicable

Re: Auto Loan Ruining Chance of Mortgage?

Say592- What did you end up doing?  This thread must have jinxed me as we got in a car crash over the weekend & totalled our only car.  I estimate we'll get about $3k back and we're in the middle of a loan approval with USDA.  Ive been looking at $3k cars and they're overpriced with high miles.  Definitely isnt much of a used car buyers market unless you want a van or suv.  Im going to call USDA tomorrow to see what they say.  We're thinking of getting a $10k or less loan for a car.  This timing sucks and I dont want to mess up our chances with the house loan.

Message 9 of 18
JM-AM
Valued Contributor

Re: Auto Loan Ruining Chance of Mortgage?


@rbenson1011 wrote:

Say592- What did you end up doing?  This thread must have jinxed me as we got in a car crash over the weekend & totalled our only car.  I estimate we'll get about $3k back and we're in the middle of a loan approval with USDA.  Ive been looking at $3k cars and they're overpriced with high miles.  Definitely isnt much of a used car buyers market unless you want a van or suv.  Im going to call USDA tomorrow to see what they say.  We're thinking of getting a $10k or less loan for a car.  This timing sucks and I dont want to mess up our chances with the house loan.


Here is an idea that may cost you a little extra money but shouldn't have an impact on your mortgage application. You will have about $3000 from Insurance company, take that money and rent a car for about 30 days at a cost of about $1000 for the monthly rate and if you can find something cheaper then by all means go the cheaper way.  Hopefully you will have the okay to close since in underwriting with-in the 30 days. Close on your home and then go car shopping! Smiley Happy 

 

This is just my opinion as a way to prolong purchasing a car until after you close. 

Good Luck
May all your dreams and wishes become a reality!
Message 10 of 18
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