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Auto before Mortgage??

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Regular Contributor

Auto before Mortgage??

I am looking at buying a Used truck and the price is $21,000....I also was wanting to apply for a mortgage later in the year around December or so. I know if I get an auto loan my score will drop initially, but how much will it drop? How long does it take to rebound after making the auto loan payments?

 

My current score is 600 and I need around a 620-630 for a Mortgage, so how long would it take for my score to rebound after I get an auto loan to where I can apply for a mortgage?

 

Or should I wait an apply for the Mortgage and then a few months later try to get an auto loan?

 

Thanks in advance!!

4 REPLIES 4
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Established Contributor

Re: Auto before Mortgage??

You should probably wait on getting an auto loan if you are wanting to get a mortgage this year.

While I can't give you the exact time it will take for your score to recover; I can say with certainty that an auto loan will negatively impact your DTI making it even harder to get the mortgage you want (not impossible, just more difficult).

If you are serious about buying a home this year, your money will be better used to clean up whatever is dragging your scores down and saving for down payment and closing costs.
Starting Score: EQ:608, EX:617, TU:625
Score 10/2018: EQ:669, EX:686, TU:668
Score 11/17/2018: EQ:682, EX:681, TU:683
Current Score 3/11/2020: EQ:695, EX:703, TU:720
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Message 2 of 5
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Established Contributor

Re: Auto before Mortgage??

Whether to apply before or after a mortgage all depends on the specific individuals credit profile. If you have a thin file, adding an installment loan could help your scores get a boost and also help to thicken you file. Now typically, a person should not apply for any new tradelines within 3-6 months of applying for a mortgage (longer if possible). Again, each persons situation is different. Most of the time, you should get the mortgage first. Afterwards you can go and get your new vehicle so your DTI is lower when you apply for the mortgage. Either way, good luck!!!   Smiley Happy

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Message 3 of 5
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Regular Contributor

Re: Auto before Mortgage??

Currently what is holding my score down is 2 old charged off credit cards, a small collection and an auto loan from 7 years ago that was a charge-off. 

 

I am paying the 2 old credit cards off next week, the collection is now paid off and should be deleted anytime and the old auto loan is 7 years old and scheduled to be deleted from my reports in OCT of this year.

 

I have no debt as the only thing I have is a $500 limit credit card and its paid off every month. I have rent and basic utility bills due each month, but that's it, so I would think my scores would go up pretty good once these few things I mentioned are gone off my report soon.

Message 4 of 5
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Frequent Contributor

Re: Auto before Mortgage??

First, you do not need a 620 score to get approved (regardless of what the last several lenders may have told you)

 

Second, if you truly are waiting til December, I wouldnt be against you getting a car loan as long as they dont run a bunch of credit pulls. They can get carried away. Since you have no other installment loans, this would help increase your scores by then. 

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