topic Re: Who should apply for loan, me or hubby? in Auto Loans

Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 02:09:18 GMT

Hello,

I am trying to get some info on buying a new car and I am grateful for any advice. This is my first time here and the first time I have asked for advice....so be gentle. I'm usually just a lurker on message boards, but I can't seem to find out info that pertains to my situation.

Okay here goes...

My husband and I both need new cars. We are going to get rid of our three older cars. We should be able to have enough cash to only have to finance a new Honda Odyssey (app. 33K) and pay cash for the other. I graduated from graduate school two years ago and he is graduating in May, so we would both qualify for the Honda Graduate Program.

Last month, we paid off almost all of our credit cards using a 401K loan—it was truly the best option for us. As far as I can tell from all I have read, 401K loans do not hit DTI because you're borrowing money from yourself. DH has one card left with a balance. The card with the balance is approxiamately 30% util. and overall util. of all cards is 5%.

He has a 12K student loan. He has never had an auto loan. All three cars are in my name.

I have the higher utilization with an overall of 25% I could them pay down to about 10% or have a larger down payment for the car. I also have about 80K in student loans, which is what I am worried about. On the plus side, I have had two previous auto loans. Both of us have NEVER missed or been late on a payment on ANY debt. Our income is about 8-10K per month gross. My husband is clearly the bread winner and makes much more than I do. I make about 1/3 of the income.

So far, the payoffs haven't hit our scores so we are interested to see what happens next month.

As of right now:

DH: EQ 690 TU 691 EX 708 (from Equifax 3-in-one)

EQ 708 TU 725 EX 719 (from PM)

ME: EQ 666 TU 666 EX 697 (from PM) 1 inquiry from 1/2012 (Stupid Kohl's!)

I am hoping to see a jump since my utilization went from +50% to 25%

So, how should we proceed? Who should apply for the loan? MY DH seems like the obvious choice, but I just want to know what everyone else thinks.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 03:35:23 GMT

Apply jointly.

I think it might be good to have loans on both cars instead of paying cash for one. Split the cash between the two cars as down payments. The high down payments will surely get you into top tier financing.

Have you found any good used Honda's? You may not need to buy a new one.

If it makes more sense to buy new, I understand. Sometimes the interest rate and new car incentives make is logical to buy new. You should be able to get 20% off MSRP, but don't accept anything less than 15%. So, an LX O.T.D. for around $25k would be about right. Honda is running 0.9% for 60 months. Don't accept anything higher than that with your high down payment.

Both loans will build good installment history on your husbands credit report.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 03:49:47 GMT

So, should we both take out loans? Yikes! How will that affect our scores?

Okay, I should also mention that we would like to buy a house in the next year—probably in the summer of 2014. By then, we will have paid off the 401K loan and the only debt we will have is the student loans and the car(s) loans. We already have the down payment set aside—I do not want to touch it—and we will be first time home buyers.

We want new cars (with the warranties) and used Hondas are almost the same price as new ones. Our three older cars are costing us too much in maintenance and we are ready to move on. They are paid off.

Thanks for all of the great advice!

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 03:57:49 GMT

Sorry, one more thing...

The reason I was looking at one loan is because we have to privately sell three cars. The trade in values from the dealership were horrendous. This means our car situation could get a little hairy. I figured I could buy the Odyssey now with the graduate program and then sell the other three cars. So, once the other three cars were sold, we could use the money to pay cash for the second car.

Honda's graduate program has a 5% down. Will I be required to put more? I can if I have to, but at .9% I'd rather use the money for something else—like paying off my last few small balances on two AMEX with 4% apr.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:10:03 GMT

@Anonymous wrote:
So, should we both take out loans? Yikes! How will that affect our scores?

Okay, I should also mention that we would like to buy a house in the next year—probably in the summer of 2014. By then, we will have paid off the 401K loan and the only debt we will have is the student loans and the car(s) loans. We already have the down payment set aside—I do not want to touch it—and we will be first time home buyers.

We want new cars (with the warranties) and used Hondas are almost the same price as new ones. Our three older cars are costing us too much in maintenance and we are ready to move on. They are paid off.

Thanks for all of the great advice!

apply jointly for the car with you as the primary and him as the secondary. Is it possible to wait until after you get the house to get the second car? Also keep in mind FHA requires 3% down and conventional requires only 5% down. High car payments can seriously affect the amount of mortgage you can afford; especially with those high student loans.

Also it would be helpful to know... how much do you have in savings for the house? how much is your 401k worth? Fully vested? How much is the loan? Option of getting a cheaper car; accord or civic? what are your and your husbands scores (Fico)

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:13:13 GMT

I am sure we could find a credit union. Do you think that is a better deal than the Honda Financial/Honda Graduate program?

We have our 5% down for the house in savings. We are just waiting to see if we want to stay here or relocate to a city with more opportunity and higher salaries. We will decide next summer.

We could technically keep our current Honda Odyssey (it's a 2005) but it is starting have problems. I was stranded with two small children a couple weeks ago and swore, "never again!" DH's car is not an option. It has to go. It is barely road worthy. The third car is a two seater convertible and not family friendly. It is worth the most money.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:16:06 GMT

@Anonymous wrote:
I am sure we could find a credit union. Do you think that is a better deal than the Honday Financial/Honda Graduate program?

We have our 5% down for the house in savings. We are just wainting to see if we want to stay here or relocate to a city with more opportunity and higher salaries. We will decide next summer.

We could techically keep our current Honda Odyssey (it's a 2005) but it is starting have problems. I was stranded with two small children a couple weeks ago and swore, "never again!" DH's car is not an option. It has to go. It is barely road worthy. The third car is a two seater convertible and not family friendly. It is worth the most money.

Do you have triple A or roadside assistance through your insurance provider? Could DH drive the convertible til after you her the house? You could sell the convertible and his car to put towards the new odessey. I just hate seeing folks disqualified for the mortgage they want due to high car notes and high student t loan payments. Id rather see y'all get the house now and get the cars after the house because DTI on a car is not nearly as aweful as DTI on a mortgage. Do you guys qualify for VA loan?

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:29:28 GMT

Consider getting your car loan from DCU or GTE Financial. Both offer very low car loan rates.

DCU 1.99% up to 65 months with a 675 EQ TU08

GTE Financial is 1.74% not sure of the score requirements or the longest term it applies towards.

Both are CU's that anyone can join. NFCU offers lower rates I think, but you need to qualify to join them. PenFed is 1.74% i think as well, but they have stricter score requirements last I heard.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:32:34 GMT

I think the honda graduate program will be fine. I think you should sell his car and the convertible until after the mortgage. At that time he can drive the odessey if you don't feel comfortable in it; and you can drive a sedan for 12 months (think in terms that he will drive this new sedan once the 2005 odessey has been replaced with a new one.) During this 1 year that he is driving the odessey; pick up roadside assistance from the insurance carrier. State farm only charges around $3 per month per car. In this way; you get a new sedan with a cheaper payment than a 2013 odessey and this cheaper payment will help you when your DTI for new home is calculated. The sedan will be something good for the family long term. The van will be on its way out the door as soon as you sign papers and get into the new house. Put the loan in as joint. It will help his "mix" of credit and improve his scores for the mortgage.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:35:37 GMT

Yeah, house first, cars second. Only get an auto loan if you are able to pay it off before the mortgage app.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:39:35 GMT

@Anonymous wrote:
Yeah, house first, cars second. Only get an auto loan if you are able to pay it off before the mortgage app.

I agree but her hubbys car is in sad shape. I think it should be replaced now; and let him drive the 2005 van until after the mortgage. 2 kids will fit in a sedan for a year. If there is a road trip just rent a van.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:42:25 GMT

Yes, we have roadside assistance.

Hmm...something to think about. I suppose we could get him the new car (he wants an Accord) and get rid of his two cars. We would still have an auto loan for about 8K, but I guess it's better than 33K. Then I would have to sink about 2K into my current Odyssey for maintanence. I just spent $600.00 for a new starter.

No, we don't qualify for a VA loan.

Even though our DTI is high because of student loans, they are not high when compared monthly because the payment is only around $500 per month.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:50:04 GMT

Oh I see. I think that is a good deal.

Besides; nothing says he has to drive the new accord. Id make him let me drive it until after the house.

You'll have a much nicer house with a $133 car payment vs. A $551 car payment.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:50:46 GMT

Hubby driving van is not an option. He drives 60 miles round trip each day and it's a gas hog. I drive 4 blocks. However, I do drive the van a lot around town with carpooling, soccer, etc....

Plus, I feel bad. The poor man works like a dog 60-70 hrs a week and goes to school to finish his B.A. He has never owned a new car. He has paid for me to have a new car (the Odyssey in 2005) but he has never had a new car.

With me working now, we are having to juggle driving kids so we both have to have cars that can fit kids.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 04:54:37 GMT

Okay, sorry to beat a dead horse...but just a hypothetical...

Our income is between $8-10K gross a month. We are looking for a home around $275K—300K max. With 15K down. Our payment should be below/around $2K a month. Does it really matter if we have a student loan payment and car payment?

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 04:55:33 GMT

Besides its a lot more fun shopping for a house when you are setting the budget based on what you like and are willing to spend vs what the bank has limited you to based on DTI.

That back end ratio makes a huge difference. Ask the mortgage pros over there! Ive heard them say more than once that the car payments are what makes the deals fall apart. If you want more specific advice on mortgages. Head over to the mortgage forum.

That is where I matriculated from. Bought my home in January 2012.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 05:04:46 GMT

Your DTI needs to be below 36% for conventional. It can go up to 45%-50% with excellent credit and strong compensating factors.
On a 36% DTI that would make your combined debt payments needing to be less than 2800 on an 8k income.

Income is averaged over 2 years. Bonuses are averaged over two years. Overtime doesn't count unless employer gaurantees it will continue.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 05:05:57 GMT

With FHA you can go up to 43% on the back end; but your house payment will be more expensive than conventional because of Fha fees.

Re: Who should apply for loan, me or hubby?

webhopper — Mon, 15 Apr 2013 05:10:37 GMT

Bankrate has some mortgage calculators you can play with if you want to see the difference in mortgage affordability with a $133 vs a $550 payment on the car; all other factors being equal.

I think you guys are smart and can figure this out on your own and what will work for your situation; I just would hate to see you run into problems on your house. FWIW my DH drove my red sedan and I drove his jeep for a year because of gas prices.

Re: Who should apply for loan, me or hubby?

Anonymous — Mon, 15 Apr 2013 05:25:20 GMT

We are definitely under the 36% DTI—even factoring in the car payment and student loans along with mortgage, but I definitely see everyone's point.

Mortgage first, car second.

It just kills me to keep sinking money into something that is depreciating. I mean $2K is a lot of money. About a quarter of the Odyssey's value. Plus, who knows if the $5K transmission is next. I know this is not a good perspective to have, but I was looking at it like this: I will spend at least $2K on maintenance and then it is going to depreciate at least $1K. That's half the car payment for the year so why not just upgrade now. Ugh. I guess I will have to live with the car for another year and a half.

Just keep chanting, "mortgage first, car second."

So, to get back to the original point...the Honda Accord...Should I apply with credit unions before going to the dealership? Should I wait until the scores go up next month? Pay off AMEX or larger down payment?

Thanks to all of you who have been so wonderful and helpful!