Can You Get a Mortgage with a Car Loan?

can you get a mortgage with a car loan? Will car payments prevent you from qualifying for a mortgage?

Thanks for joining me again and maybe you’re applying for a mortgage and you’ve got a hefty car payment you’re trying to figure out whether you can qualify maybe you were just talking to a lender recently and they said you didn’t qualify because you’ve got a car payment or car loan so uh i thought i would take this time to explain to you what the challenges are and

How it works and how the the process works when it comes to weighing in your car payment into the mortgage qualification process virtually every mortgage program is going to require the lender to uh look at your your debt to income ratio your dti and each mortgage program has various limits on how much dti where percentage is the highest amount the lender can can

Allow now with the dti is debt divided into income and the debt account part of the calculation really has a major or major impact on uh on the on the ratio in fact for every dollar of debt you have on your on your credit report a monthly payment you need to make almost three times as much to offset that so that way it doesn’t impact your mortgage qualification

So for example if you have a 300 car payment per month you need to make an extra 900 a month on average to cancel that 300 car payment out so that way it’s almost uh inconsequential it doesn’t really matter against your ratios so that’s significant so that’s uh over ten thousand dollars a year in additional income to offset a three hundred dollar a month car

Payment so if you’re unable to make that extra income you need to understand how much a car payment impacts your your buying power so i’m gonna be looking right here at the uh at the web page where we have this all outlined but for every one hundred dollars in car payment that you have that means you’re gonna qualify for on average twenty five thousand dollars

Less of a total mortgage so if you were potentially approved for a two hundred thousand dollar mortgage before you got into your one hundred dollar a month car payment now you’re likely only going to be approved for 175 000 200 a month means that’s about forty five thousand dollars less of a mortgage you can afford three hundred dollars a month means it’s about

Seventy thousand dollars less you can afford a four hundred dollar a month payment which is fairly common it’s about ninety thousand dollars less that you can afford for a mortgage it’s significant just to own a car um if you are considering uh buying a car and you’re also at the same time thinking you might apply for a mortgage i would urge you not to buy the

Car right now please don’t if you’re gonna if you’re doing both right around the same time get the house first once you have the house go to the car dealer go on the same day if you’d like after you close on the on the loan for your home go down the road and go get your car car dealers don’t care you need a pulse and that’s about it they’re going to give you

The car loan maybe not even a pulse anymore dead people might be able to get the car loan for all we know it’s easy but if you reverse it and you get the car loan first it’s very difficult to qualify for the mortgage that you want unless you have higher income and your income’s high enough where it doesn’t really matter okay so if you do have a car payment you’re

Concerned that you can’t qualify the best thing to do is speak to a really good lender who understands what to do and to how to to how to overcome that challenge if you need help finding a lender i can help you to find that just follow the link in the description to the description below and the first pinned comment i’ll help you to find a lender who can work

With you despite having a car payment they’ll look at your other things on your credit report try to figure out a workaround to squeeze out as much as they can from an approval process for your mortgage so once again it’s not impossible to qualify for a mortgage with a car loan but it’s definitely going to reduce your buying power and there might be a few things

That you can do to overcome that thanks again for watching and i hope you have a great day

Transcribed from video
Can You Get a Mortgage with a Car Loan? By Eric Jeanette – Home Finances