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Mortgage Qualification After Car Purchase (when selling current home)

Frequent Contributor

Mortgage Qualification After Car Purchase (when selling current home)

I currently live an hour from work and would like to move closer.  The market where I currently live is really hot, whereas the market closer to work is much more tepid (due to school quality for the most part).  I need to not only do some research on whether I would have a hard time selling down the road in this new area, but also want to look for a house that is in relatively good shape (most are 40+ years old and some haven't been redone in ages).


At the same time, my car is racking up the miles and I have already had an unexpected major engine failure that was covered under extended warranty.  I'd rather not hang onto that vehicle beyond the warranty expiration in case more goes wrong.  I would look to trade the car in (assume it's worth $10k) and put another $10k down on a roughly $40k vehicle that is likely coming out around year-end.


My debt/income is fairly low (27%), and I would expect my new housing payment to be comparable, if not lower.  I would also sell the current house and pay off the mortgage & HELOC (there would be a good amount of leftover positive equity I could use as a down payment, in addition to ample savings). 


However, never having sold and bought a house simultaneously, I am not sure if a lender assumes you will sell your current house or underwrites you as if you have two mortgages.  I had planned to buy the house before the car, but given I am now less sure when or if I will find a suitable house, I might have to go for the car first.  Should I be worried about qualifying for a mortgage if I buy the car first?

Message 1 of 4
Community Leader
Super Contributor

Re: Mortgage Qualification After Car Purchase (when selling current home)

I suggest first finding a RE agent to list your home for sale and start immediately looking for a home to buy.

So if you find a house to buy prior to selling your house, your sales contract would be contingent on your selling your home, usually in less than 30 days, maximum 60 days (this is a long time in a hot sellers’ market) and other sales contract offers may win. If your contract is acceptable, there would also be a contingency from the Seller—If they find another buyer prior to your selling your home, you have a choice of either removing the contingency to sell your home or if you qualify to have 2 mortgages, which the general population does not, you can move forward with the sale. If not, you’re back at square one because your contract becomes null and void, and your EMD returned.

Now, if you sell your home prior to finding another home, you can try for as late a closing date as possible, or go ahead and close on your home and move into temporary housing until you find a home.

If your DTI is as low as you say it is, your middle FICO score relatively high (760+), and you have available funds (retirement/investments, etc), these are compensating factors and a lender may be okay with an auto purchase within 12 months of mortgage application.

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Message 2 of 4
Frequent Contributor

Re: Mortgage Qualification After Car Purchase (when selling current home)

Yes, FICO score is well above 760 and there are plenty of assets (including enough cash to make half of a conventional down payment in the price range I would seek).

Message 3 of 4
Valued Member

Re: Mortgage Qualification After Car Purchase (when selling current home)

I am selling my current home and buying a new one right now. They will exclude the current home in your DTI if it’s in contract. I have seen it be excluded years ago when I was in the mortgage industry with a listing agreement, but not sure if that still applies. I’d call whoever you have a banking relationship with and see what they have to say. Also shop them around once you decide to pull the trigger.
Message 4 of 4
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