Adulthood can come with multiple milestones and a lot of big purchases like buying used cars or buying a home which is at the top of most people’s lists. If you’re looking to buy a used car and house at the same time here are a few things you want to consider.
Look at how lenders will evaluate your loan
Look at the way lenders will evaluate your loan eligibility most people need financing for a car or a home. When a lender looks at you they need to feel confident that you can pay them back. We have a few things that they will evaluate for the loan.
- Your credit history the credit score you have is a number that quickly tells them what your credit report is going to look like. This report also tells them what your repayment habits are like. The higher your credit score is the less risk the lender has to worry about. Plus the better chance you will have to get a good loan at a great rate.
- Income and employment is important to steady income best, to be honest. Employment history may reflect your loan. Employment and income history also increases the chances of loan types with a variety of lenders.
- Debt to income is a factor the ideal percentage for debt to income is around 30% if you’re upwards of 50% lenders may give you a lower loan amount. Lenders want to know you can pay down your debt obligations. It’s a less risky type of situation.
If you’re looking to get a mortgage let’s say the debt to income ratio should be around 43% or less to a lender. Don’t be surprised if you are denied a mortgage loan if your debt to income is more than 43%. Just try to keep paying down that debt.
How buying a car can affect your credit score
Buying a car before a home can reflect your credit score but paying a car loan on time with car payments can increase your chances of a mortgage. But not paying your car payment on time can look bad to auto lenders in their eyes missed car payments are risky.
When buying a car and home makes sense is a complicated question for most but when it makes sense can be the following:
- When your debt to income is very low. A car payment can complicate the income payments for mortgages.
- Paying cash for the car because it lessens the amount you can put for a down payment on a house.
- If you’re going to use the car loan to help you build your credit score so eventually you can buy a house. Pay the car loan off on time and within three to four years.
What is your financial goals?
If you are looking to buy a car and then a house or vice versa it can come down to your lifestyle and financial goals. Both car loans in Arlington Texas and home loans can impact your credit score and debt to income ratio but mortgages can be more sensitive to these fluctuations. Understanding these factors and how they play into each other can help you make a better choice of which one to get first.