*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
One of the most notorious cardinal sins made during the home buying process is purchasing a car during the same time period. Even though this suggestion is made clear to borrowers, they don't always heed our warnings.
Purchasing a new car before your loan closes could be a deal killer. Don't let a financial move like this put a halt on the progress you've already made.
So, what's the big deal? Why isn't it smart to buy a car while simultaneously working on a home loan? The biggest answer is credit and DTI ratios.
As I've mentioned before in previous articles, credit is extremely important when qualifying for a house. There are certain guidelines and standards associated with each loan product that involves credit. It only takes a few points of credit to be the difference between qualifying for a home, and coming up short.
A major purchase of any type including cars, boats, investment properties, etc. will add new debt to a borrower's credit report. This new debt will lower a borrower's credit score, sometimes by a significant amount.
Car salesman are known for checking, and re-checking your credit score over and over again, which will add inquiry's to a borrower's credit history. Repeated and frequent new inquiries will lower credit scores, and the borrower will have to write letters of explanation to explain why each individual inquiry has been added.
These aren't the only things you need to worry about when it comes to making big purchases during the loan process. Buying a car or other major purchase during this time period can affect a person's debt to income ratios. The increased debt that a borrower is assuming can put a borrower out of reach of qualifying for a new home loan.
These are only some of the many reasons why it is important to not take out credit on things, like cars, during the home buying process. If you have any questions, or are thinking about purchasing a car and home around the same time, please contact me. Let's chat through the different time frames and scenarios and make sure that you're placed in a good financial position.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS #1606597
Kommentarer