Which one should I get first, a mortgage loan or auto loan? Please help!!

[Anonymous]

Hi Fico Community,

            To begin everything, I am new at building my credit. I am young and only opened my first credit card 4 years ago while in college. That credit card defaulted since I was behind payments. I settled it with the bank but have a bad mark on my credit report. Currently, I only 3 have credit cards to help build my credit score and do not have any loans of any kind. Currently, MyFico Score Watch updated me that my Experian Score is now at 698.

Now I am in need of a new vehicle. I am also shopping for a mortgage and hopefully own a house this year. Is it possible for me to obtain an auto loan for $7000-$10,000 in the next few weeks AND obtain a mortgage ranging $100,000-$135,000 later this year around July/August?

I just want to be sure so I do not shoot myself in the foot and be denied the mortgage. Should I get the mortgage first the auto loan? Any advice or help will be greatly appreciated. Thanks.

[namvet]

If your auto is reliable i would work on geting the mortgage first. 

[mocha82]

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@Anonymous wrote:

Hi Fico Community,

            To begin everything, I am new at building my credit. I am young and only opened my first credit card 4 years ago while in college. That credit card defaulted since I was behind payments. I settled it with the bank but have a bad mark on my credit report. Currently, I only 3 have credit cards to help build my credit score and do not have any loans of any kind. Currently, MyFico Score Watch updated me that my Experian Score is now at 698.

Now I am in need of a new vehicle. I am also shopping for a mortgage and hopefully own a house this year. Is it possible for me to obtain an auto loan for $7000-$10,000 in the next few weeks AND obtain a mortgage ranging $100,000-$135,000 later this year around July/August?

I just want to be sure so I do not shoot myself in the foot and be denied the mortgage. Should I get the mortgage first the auto loan? Any advice or help will be greatly appreciated. Thanks.

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DON'T get an auto loan prior to getting a mortgage.  Any large purchases can affect your DTI ratio or scare the underwriter and your loan could be denied.  It's easier to get a car than a house.  Try to stay away from large purchases until after you close.

[llecs]

+3  Home first.

Aside from DTI, the new credit aspect to a car note will drag your FICO scores down and the effects from that will probably still be felt in July/Aug.

Also, your 698 score is Equifax, not Experian.

[FrugalRican]

Sorry to interject in this thread, but I had a question related to his...

Say the scenario was different and he wanted to buy a car now and think about the mortgage a year after? Would the case be different? How about two years after?

[llecs]

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@FrugalRican wrote:

Sorry to interject in this thread, but I had a question related to his...

Say the scenario was different and he wanted to buy a car now and think about the mortgage a year after? Would the case be different? How about two years after?

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If it was after a year, my answer wouldn't be focused on FICO scoring, but on DTI. Now if OP had $$$$$ in the bank to pay off the car loan to cancel out the DTI -or- if OP had excess income to offset DTI  -or- if OP had the savings to make a bigger down payment to lower the loan amount to lower DTI (or choose a less-priced property), then I'd feel that DTI weren't an issue either. It's none of my business, but as far as I know, OP could be living under his/her means where DTI isn't even an issue at all.

[FrugalRican]

Okay, was just curious. I might be in a position where I am buying a car in late 2013/early 2014 and a house 2015/2016... of course, all this if the world hasn't ended :/

[my25reasons]

The loan for a vehicle would lower the mortgage amount you are approved for. Unless, you currently have a vehicle loan for a similar amount and are looking to trade in for a vehicle that is similarly priced...which I'm guessing you do not?

The more monthly payments you are making, the less money available you will have for a mortgage payment. As long as your score stays above 630, you should be able to get a mortgage, you will just have a higher interest rate tacked on to it.

I would focus on preparing for the mortgage loan if you are looking to buy in the next year, if it is feasible. If you have no means of transportation though, you have to do what you have to do.

I took out an auto loan in october and was approved for a mortgage in December...my score has not been affected. However, my DTI is below 30%. The higher your DTI, the more affected your credit score.

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@FrugalRican wrote:

Sorry to interject in this thread, but I had a question related to his...

Say the scenario was different and he wanted to buy a car now and think about the mortgage a year after? Would the case be different? How about two years after?

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[Anonymous]

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@llecs wrote:

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If it was after a year, my answer wouldn't be focused on FICO scoring, but on DTI. Now if OP had $$$$$ in the bank to pay off the car loan to cancel out the DTI -or- if OP had excess income to offset DTI  -or- if OP had the savings to make a bigger down payment to lower the loan amount to lower DTI (or choose a less-priced property), then I'd feel that DTI weren't an issue either. It's none of my business, but as far as I know, OP could be living under his/her means where DTI isn't even an issue at all.

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So from what I understand, if my DTI is within acceptable range, I would most likely qualify for a mortgage and auto loan. Using Bankrate.com DTI calculator, based off projected monthly expenses(auto loan of $7000 including current monthly household expenses) and current salary, my DTI is ~34%. If I get the auto loan and have a co-signer who has a manageable DTI themselves, my DTI should be reduced and the mortgage can be obtainable?

[my25reasons]

Sure it could. As long as your income supports it, I don't see an issue. Many people have auto loans and mortgages.