Please help me!?!? Two auto loans!

Anonymous · ‎09-20-2009

I have an auto loan which I am going to pay off in one year (car lease) and then I have to either lease or finance another car (a new auto loan). However, I need another car for my wife now and was wondering if I should buy it now rather than waiting till next year to avoid having two new auto loans around the same time period.

What do you guys think? Will that strategy minimize the negative effects on my credit score (TU 738, EQ 740)

If any of you guys had some prior similar experiences, I would appreciate if you can share it with me.

Thanks a lot.

P.S. I also might buy a new house next year too (now renting) too complicated, I know, and that's why I need some guidance.

llecs · ‎09-21-2009

Top wrote:
P.S. I also might buy a new house next year too (now renting) too complicated, I know, and that's why I need some guidance.

Don't lease or finance anything if you are going to buy a home within a year. While DTI isn't a part of FICO scoring, lender rely heavily on it to make a decision. Buying a car could impact your DTI in a way that may knock you out of contention for the home you're looking for. With a lease or loan, the only way to lower DTI at mortgage time it to completely PIF. Buy or fix what you have now without financing and you can always finance later without impacting your chances for approval.

The negatives are relatively minor if you did add a car. Your score will drop max 40 points between the two due to the two inquiries and the new credit w/ a rebound after a year from purchase.

Anonymous · ‎09-28-2009

Sorry but what is DTI?

Between now and next year (Sep 19th, 2010 to be precise), I must get another car since my current car lease is gonna end. So I was thinking that it might be a better idea to get the new car now so that I avoid having two credit checks that are close from each other?

What do you think?

llecs · ‎09-29-2009

Top wrote:
Sorry but what is DTI?

Between now and next year (Sep 19th, 2010 to be precise), I must get another car since my current car lease is gonna end. So I was thinking that it might be a better idea to get the new car now so that I avoid having two credit checks that are close from each other?

What do you think?

DTI is the Debt-to-Income ratio. It is the sum of all monthly obligations (loan payments, min. CC payments, mortgage-to-be, etc.) divided into your monthly gross income. Mortgage lenders factor in DTI when figuring how much house you can afford. You may want to confirm this over in mortgages, but a rule of thumb is that 43% max of your monthly income can go towards these expenses, with the remaining going towards taxes, savings, life, etc. Preferably, they like to see your DTI in the 30% range.

So, if you puchase a new car, then you are on the hook for $x per month until you pay it off. As a result, you'd have to buy a smaller house if that $x monthly payment cuts into your DTI. You'd have to do some figuring to see what impact you'd experience by adding a new monthly payment.

http://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx

It may or may not impact you. Depends on your income and your other expenses.