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Car Lease/Purchase and Mortgage

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New Member

Car Lease/Purchase and Mortgage

Hi everyone,

I'm currently at the end of an auto lease (2 months until it's done - 1 payment left) and I'm pretty sure my plan is to just buy the lease out. It has a great residual value and I love the car.

Currently my payment is $428 a month and when I buy it out the payment will go to around $250.

My issue is that I'm not sure if I should get pre-approved for the mortgage before buying out the car or after. Doing it before shows much higher payments and limits how how much I will prequalify for but doing it after will show more debt as well as another hard inquiry into my credit.

What would you suggest?
5 REPLIES 5
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Super Contributor

Re: Car Lease/Purchase and Mortgage

Welcome to the board.  This is a very tricky situation albeit a simple one.  It comes down to which is more important to you.  Is it the mortgage or the car? The reason being, if you really want to go for the mortgage, you don't want anything new reporting thus debt, inquiry etc...

 

An option for the car could be have a family member have it in their name and once you get the mortgage you can just buy it from them thus, if the car is a must have for you.

Message 2 of 6
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Established Contributor

Re: Car Lease/Purchase and Mortgage

If you get pre-approved you run the risk of surprises down the road when you close after you buy the car.  Better to buy the car now then you know what you are dealing with.  You don't want to make any changes after the pre-approval and your two month window is very small to find a house and get a mortgage done. 

Message 3 of 6
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Frequent Contributor

Re: Car Lease/Purchase and Mortgage

If you're currently borderline with your score then I wouldn't want to risk it with the HP and the new account.  However if your score is solid and you're trying to prequilfy for a higher amount then you can buy the car to show the lower payment which will lower your DTI.  I know people shy away from new credit before getting a mortgage but it seems new credit cards are more of an issue.  We did a cash out refi on our old house with a new lender in the middle of getting a new mortgage for the house we were building and it was all fine.  Plus my wife traded cars.  The LO said as long as everything stayed close to the same we were fine.  We just had to document everything.  That said we also both had 720+ scores across the board, were putting 20% down and borrowing much less than we were approved for.  Every case is different.  Just make sure you talk to a LO and are up front with what you're trying to do up front.  

Message 4 of 6
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Moderator Emerita

Re: Car Lease/Purchase and Mortgage


@MakeItAMudLight wrote:

If you're currently borderline with your score then I wouldn't want to risk it with the HP and the new account.  However if your score is solid and you're trying to prequilfy for a higher amount then you can buy the car to show the lower payment which will lower your DTI.  I know people shy away from new credit before getting a mortgage but it seems new credit cards are more of an issue.  We did a cash out refi on our old house with a new lender in the middle of getting a new mortgage for the house we were building and it was all fine.  Plus my wife traded cars.  The LO said as long as everything stayed close to the same we were fine.  We just had to document everything.  That said we also both had 720+ scores across the board, were putting 20% down and borrowing much less than we were approved for.  Every case is different.  Just make sure you talk to a LO and are up front with what you're trying to do up front.  


^^^This.

 

It is not the fact of a HP that mortgage lenders are concerned with - it is the run up of debt.  It is perfectly logical that you would buy out your current vehicle at the end of the least term.  The lender will probably ask for a letter of explanation (for the file) and that will be it. Nothing to worry about.

Message 5 of 6
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New Contributor

Re: Car Lease/Purchase and Mortgage

Talk to your LO. My may experience when I brought my house was they (NFCU) did not care what I did credit wise during the home buying process. They advised that if I take on more debt before I closed it could reduce my approval amount. No problem as I was approved for $325k and only needed $200k to make the purchase. YMMV

Again, talk to your LO and be up front with them about what you want to do.
In the garden until June 2018

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