Will my car loan affect my mortgage application?

I’m still paying off my car and have been looking for a house. Will my car loan affect my mortgage application?

Answer
Your car loan affects your credit score, which can affect your mortgage application. More specifically, your car loan is considered a debt in your portfolio and impacts your debt-to-income ratio (monthly expenses divided by monthly income).
If your credit score is too low and your debt-to-income ratio is too high, you may be unable to qualify for certain mortgage terms (or not qualify at all). It doesn’t mean it’s impossible to get a mortgage; your terms may just be less favorable.
You have a better chance of getting a good mortgage if you do the following:
  • Pay off your car loan faster. Pay bi-weekly or round up payments to the nearest $50 or $100
  • Try to get a discount on your loan (sometimes you’ll get discounts for making automatic payments)
  • Improve your credit score
Once you secure a mortgage, you can look into rolling your mortgage and car loan together into a consolidated loan to make payments much easier.
If you’re looking to free up extra cash to make loan payments easier, use Jerry to find cheaper car insurance. Choose from competitive quotes from up to 50 top insurance companies and Jerry takes care of the rest—securing your new policy and canceling your old one.
Lauren Smith
Answered on Nov 10, 2021
Lauren has written for World Nomads, the Matador Network, Korvia Consulting, and once upon a time Three Fates Games. She graduated from Columbia College of Chicago with a BFA in Creative Writing. After graduating, she moved overseas and lived in South Korea where she spent her free time traveling and going on road trips with friends. She misses the rest stop potatoes and is trying to figure out how to recreate them at home. She's now based outside of Chicago and when she's not writing she spends her free time reading, playing video games, and exploring whenever she can.
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