How can a car loan affect my mortgage?

I just took out my car loan when I found out I'm pregnant with my first child. Now my husband and I want to buy a home, but will my car loan affect a mortgage?

Answer
Congrats on the new arrival to the family! Since parenthood is about to make your life busier, it’s a good idea to plan out your car loan and mortgage now. The amount of debt on your car loan can limit what kind of mortgage you qualify for.
Your car loan will be a large form of debt visible on your credit report. The more you’re paying for the car each month, the higher your debt-to-income ratio will be, which may lower the amount of money lenders will give you for a mortgage.
If you can’t get the mortgage size you want with your current car loan, consider refinancing the car to extend the loan and get lower monthly payments. Alternatively, you could pay off more of the loan now before applying for a mortgage.
Since you will need at least 3.5% for a house down payment, it’s a good idea to look for other ways to free up some cash—including finding savings on your car insurance. Use Jerry to compare quotes from up to 50 top providers and switch to a more affordable policy in-app.
Eric Schad
Answered on Oct 28, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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