Utah County Real Estate - Car Payments and Your Home Purchase
When determining your ability to qualify for a home loan, a lender looks at what is called your "debt-to-income ratio. The debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner's association fees. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, etc.
Buying a new car during the Home Loan Process can drastically affect the outcome of your Mortgage. Let's suppose you earn $5,000 a month and your car payment is $400. Depending on the interest rate you are able to get, you would qualify for between $50,000 and $75,000 less for your home purchase than if you did not have the car payment.
Whenever the thought of buying a car enters your mind, think ahead. Think about buying a home first, buying a home is a much more important purchase when considering your future financial well being.
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