Can You Buy a Car Before Buying a House?

Can You Buy a Car Before Buying a House?

Wondering if it's okay to purchase a car before getting a mortgage for your new home? Let's break it down:

Yes, You Can Buy a Car Before Buying a House, but...

While it's technically possible, it's not always advisable. Here's why:

1. Impact on Credit Score:

   - When you apply for a car loan, your credit score may temporarily drop.

   - A lower credit score can affect your mortgage eligibility and interest rates.

2. Increased Debt-to-Income Ratio (DTI):

   - Your DTI plays a crucial role in mortgage approval.

   - A new car loan can raise your DTI, potentially hindering your home loan approval.

3. Red Flag for Lenders:

   - Mortgage lenders may be concerned if you acquire new debt before a mortgage application.

   - They assess your credit history and financial stability.

4. Impact on Down Payment:

   - Purchasing a car with savings can deplete your funds for a down payment and closing costs.

   - A smaller down payment may affect your mortgage amount and costs over time.

What to Do If You Must Buy a Car Before a House:

If buying a car can't wait, consider these strategies:

   - Buy the car well in advance to allow your credit score to recover.

   - Create a separate savings fund for a car down payment to reduce financing needs.

   - Opt for a more affordable vehicle, or negotiate a better trade-in deal.

   - Discuss your situation with your Cornerstone First Mortgage advisor for guidance.

Buying a Car While in the Mortgage Process:

If you're already approved for a mortgage and waiting to close:

   - Be cautious; new car loans can impact your mortgage approval.

   - Changes in your DTI or financial status could affect your mortgage terms.

In summary, while buying a car before a house is possible, it's essential to plan wisely and consult with your Cornerstone First Mortgage advisor to ensure it won't jeopardize your homeownership goals.

*[Disclaimer: Cornerstone First Mortgage is not a credit repair organization. Debt-to-income (DTI) ratio and eligibility for down payment or closing cost assistance are subject to program requirements and guidelines.]*