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Should You Buy a New Car if You Are Also Thinking About Buying a New Home? You May Want to Wait!


You need a new car. You need a new home. But will buying the former impact your ability to buy the latter?


A recent article from realtor.com outlined the ways taking out a car loan could impact your ability to get a mortgage (and to get the best rate on that mortgage), including:

  • Changing your credit score. When you apply for a car loan, it will show up as a hard inquiry on your credit report. While hard inquiries don’t have much of a long-term impact on your credit, in the short-term, they can lower your credit score by a few points—which, depending on your score, could jeopardize your ability to secure the most competitive rate (or to qualify for a mortgage at all).

  • Changing your debt-to-income ratio. Debt-to-income ratio is one of the most important factors lenders use to determine how much house you can afford—and, as such, what mortgage amount you are approved for today. Taking out a car loan before buying a house impacts your debt-to-income ratio and can result in you getting approved for a smaller loan.

  • Acting as a “red flag” to your lender. Making a big purchase (like a car) and taking on more debt prior to buying a home can be a red flag to lenders that you are not responsible with your finances—which could impact your ability to get approved.

The Takeaway:

So, what does this mean for you? If you are thinking about buying a new home and a new car, you may want to consider waiting to buy the car until after your home purchase is all wrapped up.


Should You Buy a New Car if You Are Also Thinking About Buying a New Home? You May Want to Wait!

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