How will auto loan affect my home purchase?

[Anonymous]

I applied in the last week for 3 auto loans and was approved for 2, and should receive an answer on the 3rd tomorrow (most likely approved there too).  Now, yesterday I see in the news that the tax credit for 1st time home buyers ends December 1st, and am considering looking for our 1st home before that credit expires.  We were thinking about purchasing next year, but this credit has pushed me to start looking now.

My question is, if I go ahead and purchase a car now, will it hurt my mortgage loan rate?  Will there be a big difference if I don't accept the loan compared to accepting it, since I've already applied.

First time here and pretty new to the whole credit score topic, so if this doesn't make sense I'd be happy to try clearing it up.  Any help would be appreciated!

[Anonymous]

If you have already applied for 3 loans it will show up on your credit and will lower your score some. You'll probably need to write an explanation letter for the UW.

If you will end up buying a car then your score will drop and then as you make payments on time will bounce back or even go higher.

Dropping 20-40 points won't necessary hurt you if you go for USDA (as long as you stay above 660+).

If you are going for conv. loan then it can hurt you big time.

Plus getting an extra payment will change your DTI.

You are also need to prove you are in a very good financial situation. All of a sudden paying an extra $500 + $1500 = $2000 a month without going into payment shock.

Laz

[DallasLoanGuy]

get preapproved.

buying a car may kill your deal. and it may have ZERO effect.

the fact that you 'just bought' a car doesn't mean a thing...... depends on credit(scores) and debt ratios.

[Anonymous]

I am planning on using an FHA loan.  My credit score 3 months ago was 730.  Problem is I really need a car right now.  I'm currently renting from Hertz, which is expensive.  But, if buying a car will affect my home purchase, I'd rather keep renting until after the home purchase.

Dallas, are you saying to get preapproved for a home loan?  How would that work?  Thanks.

[Anonymous]

Am in the same situation - want to take out a small loan for a better get-to-work car before it turns cold, but afraid to because waiting for a loan approval and it worries me that it might trigger something..

Also found out the hard way, "pre-approval" means nothing, have been waiting for nearly 3 weeks to hear whether an underwriter is going to approve my "pre-approved" FHA loan or not... am really getting discouraged on all of this, too much stress and uncertaintly have left me with the feeling of would really like to cancel the deal but am afraid of losing my earnest money deposit (which I could have used towards better transportation! )...

[Anonymous]

Its hard to say exactly how much new credit will drop your credit score but between your inquires and a new loan you are probably looking at a 30-50 point drop, so you *should* be okay there. Ideally you would want to keep your mid above 660. When you say your score is 730, is that your mid and did you purchase that from myfico? If the answer to both is yes then it will probably come down to your DTI, how does it look?

[DallasLoanGuy]

Guys.... APPLY!!!  No problem getting pre-approved long before you buy. Data can be refreshed when you want to start looking at homes.

The loan officer can simulate a car purchase by adding it to your debt ratios.

Someone with a 700+ FICO score going for FHA doesn't have much to worry about unless the auto blows the debt ratios sky high.

Lionel: A good loan officer's pre-approval is solid. A bad loan officer's pre-approval isn't worth the paper it is written on. Also.... the good loan officer will tell you if you have a solid pre-approval or if it is dicey.

Get referred to a good loan officer by your realtor.

[Anonymous]

730 was the mid and I did get it from myfico.  I know this is a very basic question, but how would I figure DTI?

Also, if I do go ahead with the car purchase, how soon can I check my credit score to get an updated score with the auto loan factored in?

[Anonymous]

Truer words were never spoken - am finding out the hard way the difference between a "good" loan officer and a "bad" one and if I manage to get out of this transaction with only paying for the inspection and termite, I think that will be a lesson well learned.  Unfortunately WAS referred by the realtor... It may still go through, but can't help but be pessimistic at this point ...

In the meantime, do have DEFINITE, IN WRITING approval for a small car loan lol, think will go ahead and do it to ensure good work transportation, then pay off as quickly as possible - certainly can't hurt at at this point - thank you for your insight, it gave me something to think about and is appreciated...

---

@DallasLoanGuy wrote:

Lionel: A good loan officer's pre-approval is solid. A bad loan officer's pre-approval isn't worth the paper it is written on. Also.... the good loan officer will tell you if you have a solid pre-approval or if it is dicey.  Get referred to a good loan officer by your realtor.

---

[Anonymous]

LARL43:

To answer your question on figuring DTI.  This is based on your Debt to Income ratio.  Income being gross (before taxes).

You want your max monthly house payment to be less than 31% of your monthly gross income and your max overall debt (including car loans, min credit card payments or Student Loans) to be a max of 43%

However with a score of 730 you could probably push that 31/43 a bit higher.

Once your 2nd car statement is generated it should post on all 3 reports at the latest.

Good Luck!