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Can a car loan affect my mortgage prospects?
I want to get a mortgage, but I'm afraid it might affect my chances to get a car loan. Is this the case? What should I do?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congratulations on your upcoming purchases!
To answer your question, yes, a
car loan
may affect your mortgage prospects, but you still have a solid solution.If you’re shopping for a house, you want to present a credit profile that’s at its strongest point. That said, a few things happen when you get a car loan:
- Your credit score can drop by five to 10 points
- A car loan may affect your preapproval for a mortgage
- A car loan can increase your debt-to-income ratio, which is problematic if it pushes you above the generally acceptable rate of 43%.
With the impact that a car loan has, most experts agree that you should buy a home first and a car second. But you should also ask these questions:
- How soon are you buying the house?
- Will buying a car keep your debt-to-income below 43%?
- Do you already have a car? Or do you need one now?
By answering these questions, you can make certain that you’re making the right move. Plus, if you have strong credit, high income, and live within your means, choosing which one to buy first isn’t nearly as difficult of a decision.
Whether you decide to purchase a car for or second, don’t forget about your car insurance. Check out the
Jerry
app for the best deal on the coverage you need—we’ll get you personalized quotes from top insurers around the country so that all you need to do is choose the plan that works best for you.Best of luck with both your new house and new car!
View full answer
- Gregory R.
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