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New Lower Car Payment or Wait Until Closing

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Anonymous
Not applicable

New Lower Car Payment or Wait Until Closing

My first time posting, hoping for some advice.  I have a mortgage pre-approval, actively searching for a house.  BUT, just found out that my car needs some major repairs.  I mean major.  I also have negative equity and a higher car payment currently.  However,  I can trade in current car for a much better interest rate and much lower payment.  I checked with LO and was told that as long as current car loan is paid off and new car loan is lower than I should be fine.  I am so nervous about the what ifs.  Does anyone have experience with this, is ok to trade in for lower payment or should I dip into my house savings to buy a really inexpensive car to get my by until I close?

 

 

Message 1 of 7
6 REPLIES 6
Medic981
Valued Contributor

Re: New Lower Car Payment or Wait Until Closing

Welcome to the myFICO forums!

 

I have no home buying experience, however, I know from reading the forums that you want no new tradelines or inquiries within 9-12 months of financing a home mortgage. What are your FICO mortgage 5-4-2 scores? You don't want to risk changing these scores which will cause you to pay more in interest?







Your FICO credit scores are not just numbers, it’s a skill.
Message 2 of 7
Anonymous
Not applicable

Re: New Lower Car Payment or Wait Until Closing

Hello OP, medic is 99% correct with their response. However, if you fall into that 1% you could pull something off.

First. I wouldn’t recommend dipping into your savings. Unless it barely effects your down payment.

Secondly. Your LO is probably correct in that, the smaller payment will look better from a DTI perspective. But your troubles will be faced when that new loan reports. Inquiry and account. If your scores are able to sustain a sizable change. It’s something you can consider. They mortgage company will ask for an exact reason as to why you picked up a new loan so close to the closing.

What is the potential time frame between the two? Are we talking days, weeks or a month or two?
Message 3 of 7
CreditInspired
Community Leader
Super Contributor

Re: New Lower Car Payment or Wait Until Closing

I'm glad you're worried about the what ifs because you should be. 


Is your pre-approval one where you've already submitted all your mandatory docs or is it one where you've just verbally provided info? If anything is outstanding, I would not chance it no matter what LO say. 


Do you have to have a car? Is there public transportation to get you by the next 3-4 months? 

 

Is your middle score strong--760+? If not, again, if it were me I would not chance it. When I was a Realtor, nothing derailed a closing faster than finding out a buyer purchased a car or bought new furniture prior to closing. 

Is your DTI excellent or good, or is it teetering close to the edge? If the latter, again I say don't do it. 

 

And the real question that only you can answer--is getting a new vehicle right now worth risking the possibility of being a home owner in a few months?

 

YEP, I vote for waiting until after closing. 


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Message 4 of 7
Anonymous
Not applicable

Re: New Lower Car Payment or Wait Until Closing

Thank you for your reponse Rickd21.  The timing for the car would be like tomorrow, but as far as the house, I'm really not sure.  I was already out bid on one and looking at another one today.  So it could be soon or I was thinking maybe if this one does not work out, I'll just wait.  I really need a car, my commute is too far to work. This is so stressful.

Message 5 of 7
Anonymous
Not applicable

Re: New Lower Car Payment or Wait Until Closing

Thanks for your response credirinspired.  I submitted my bank statements and paychecks, so I think they looked at it.  I've been working with the LO and have been going back and forth with different scenarios, like purchase price and monthly payment.  

 

I really need a car, my commute is too far to work and there is not transportation to get me there.  I thought about getting a rental car, but that's expensive.  I also thought about just buying a cheap car outright but that will dip into my savings.  I could make it up pretty soon, but I worked so hard to save and not spend. No, my middle score is only 680.

 

The new car would replace the old car loan, lowering my DTI and it's ok right now.  Yea, my gut says wait, but I also don't know how long it will be before I find a house.  Sigh...

 

Message 6 of 7
Anonymous
Not applicable

Re: New Lower Car Payment or Wait Until Closing


@Anonymous wrote:

Thanks for your response credirinspired.  I submitted my bank statements and paychecks, so I think they looked at it.  I've been working with the LO and have been going back and forth with different scenarios, like purchase price and monthly payment.  

 

I really need a car, my commute is too far to work and there is not transportation to get me there.  I thought about getting a rental car, but that's expensive.  I also thought about just buying a cheap car outright but that will dip into my savings.  I could make it up pretty soon, but I worked so hard to save and not spend. No, my middle score is only 680.

 

The new car would replace the old car loan, lowering my DTI and it's ok right now.  Yea, my gut says wait, but I also don't know how long it will be before I find a house.  Sigh...

 


Hi OP! Don't do it. Creditinspired and the rest are right. I know from my own recent experience. Hubby  paid off a car and leased a new one in May. His mid mortgage score went from 741 to 707. We were freaked out. By the end of July, mid mortgage score went back up to 728. Applied for a mortgage in mid-August. Because there were only two inquiries in the last two years, we were okay. Purchased a new build, and we won't be closing until late December or January. Mid mortgage score dropped again to 718. 

 

As you can see, mortgage scores will dive with this kind of activity. Borrow a car from a family member or friend. Good luck. Wish you the best. 

 

 

Message 7 of 7
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