Is it advisable to pay off car loan before applying for home mortgage ?

[DTS]

Hi

I am planning to buy new home. My contract is signed and may need to apply for mortgage in next 10 days.

I   was qualified for same amount of mortgage I am applying now 6 months back.

Within 6 months the only thing changed is addition of my car  loan which is   approx. $ 9000.

Monthly installment is $527 for 2 years. ( 18 months remaining.)

My question:

1) My car loan amount is not big.  How does this $527 monthly payment count towards my liability? It is only to be paid for another 18 months.

2) Is it good to pay off this amount before applying for new mortgage?

What should be best strategy?

Can you please advise?

Thanks

Shodhan

[Anonymous]

The $527 will factor intor your Debt to Income ratio as would any other debt. Whether it makes a difference or not, would  depend upon other factors, income and other debt.

If you have the funds to pay it off, I would suggest you look at what those funds could be used for to get you the greatest return. Instead of puting that money towards paying off the car, look at what you could do with the funds as far as buying down the interest rate. That would give you a long term benefit that may outweigh the shorter term benefit of having the car paid off.

The decision on how to use funds such as those are really is unique to every borrower's short and long term goals.