The answers below are right on. If you applied for an auto loan, it won't necessarily hurt your chance of getting approved, but it does decrease the amount you could otherwise get approved for. The credit pulled to approve you for the auto loan will lower your score for a short period as well. Here is a link to an article about credit written by the CEO of my company on his blog: http://richardhartian.com/?p=264
The best advice you can follow now is do not apply for any new credit until after you have closed on your home.
Senior Loan Originator
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Robert L. Hanson
Gladewater National Bank
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When you buy a new car, your car loan appears on your credit report. If it raises your debt-to-credit-limit ratio too much, your lender may decide that you can no longer afford to buy the home of your dreams, and thus a car loan could stand in the way of getting a mortgage loan. If you make enough money should not be a problem! Good Luck Nadina!
You have to prioritize when making decisions that are this big. What's more important, a new car or the purchase of your home?
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
As far as your debt ratio, this may limit the amount of home you can afford. Your total debt ratio should not exceed 55%! Don't open up any more credit cards & buy furniture AFTER the closing. Hope this helps.
The car note payment would be added into your debt and this would reduce how much house you can buy. Also, I have seen borrower credit pulled by a legion of car dealers in the course of one transaction and the inquiries can drop your credit score..
Judging by your zip code you must be very close to my office Please feel free to stop in and sit with me for a one on one conversation. I can certainly help you navigate the process from preapproval to closing. As a first time buyer, that might help a great deal.
Nike Fasanya, CMC
That is a great question. Many times you hear what you should or should not do to help your credit.
The two ways it would effect you is... First the auto dealership pulled your credit. This could lower your credit score between 2 and 6 points. Secondly the new payment will be included in your debt to income ratio.
This is something we use to qualify a person for home loan.
Please do not hesitate to contact me to look into getting you pre-approved for a mortgage.
And dont forget if you get a contract by April 30th and close by the end of June you will be able to get the first time home buyer tax credit up to $8,000.
Ardain Mortgage Corp.
Senior Loan Originator
When determining qualification for a mortgage, lenders use, among other factors, your front-end and back-end debt-to-income (DTI) ratios. Your front-end DTI is for housing, and includes the monthly mortgage principal and interest payment, 1/12 of your annual property taxes and homeowner's insurance premiums, and monthly mortgage insurance premiums and homeowner's association dues, if any. Typically, your front-end DTI can not exceed 31% of your total monthly gross income.
The beck-end DTI includes your monthly housing payment and all other monthly debt obligations. Your back-end DTI typically can not exceed 41% of your monthly gross income, but can be as high as 45%.
The more you pay in monthly debt obligations, the less that will be available for your monthly housing payment. Thus, you might not be able to afford as much house as before you took out the car loan.
The monthly car note will now be applied against your gross monthly income. So if its 300 a month, that's 300 less you now have to put towards your mortgage, effectively reducing your total loan amount and how much home you can afford.