Buy a car before a house?

[mommyof2princesses]

We just sold our house and our totally debt free. We have one car that we paid off about a year ago. We are house hunting for our next house. We have a pica score in the 800's and more than enough for a 20% downpayment. But, we have no debt....Do you think that will affect us in getting a good loan? We are going to need to buy a new car soon because we plan on living out of town and dh and I will both need cars. Should we buy a car before we try for our loan or wait until we acutally buy our house? We plan on buying and closing in the next 5 months. Any advice? We do have a 2 credit cards..one we do not use anymore and another that we pay off every month. NEither one has ever has a balance carried over from the previous month.

 

[DaveClan]

I believe the rule of thumb, is to not apply for new credit within 6 months of a housing purchase. Applying for new credit can negatively affect your credit score which in turn affects your mortgage rate.

 

[Kae]

I believe the rule of thumb, is to not apply for new credit within 6 months of a housing purchase. Applying for new credit can negatively affect your credit score which in turn affects your mortgage rate.

I agree.

Kae

 

[elgerber]

I believe the rule of thumb, is to not apply for new credit within 6 months of a housing purchase. Applying for new credit can negatively affect your credit score which in turn affects your mortgage rate.

This is true, but if your credit is truly that excellent and you don't have much other debt, and have not had inquiries into your credit recently, I don't think one car loan will hurt it enough to affect your rates.

 

[mommyof2princesses]

This is true, but if your credit is truly that excellent and you don't have much other debt, and have not had inquiries into your credit recently, I don't think one car loan will hurt it enough to affect your rates.

I was thinking that too!~

We actually don't NEED to buy a car before the house, was just trying to figure out if it is better to show we have some debt that we are paying off each month, or is it good enough to see that we had debt that we always paid on time and paid off. WE have had 2 houses, a few cars and student loans that we always paid on time and finally paid off. DH is really good with money and keeps me in check!

 

[DaveClan]

It's best to wait until closing to shop for a car. Often times your credit will be "shopped" around for competitive rates. This could put a half dozen inquiries on each credit bureau within a 10 minute period!

A new installment account, new inquiries, etc WILL drop your FICO scores (how many points depends on how thin your file is) which affects lending rates. It takes several months to recover those temporarily lost FICO points.

 

[mommyof2princesses]

It's best to wait until closing to shop for a car. Often times your credit will be "shopped" around for competitive rates. This could put a half dozen inquiries on each credit bureau with a 10 minute period!

Thanks! Now to find a house we both like!

 

[Luckymomoftwo]

I was thinking that too!~

We actually don't NEED to buy a car before the house, was just trying to figure out if it is better to show we have some debt that we are paying off each month, or is it good enough to see that we had debt that we always paid on time and paid off. WE have had 2 houses, a few cars and student loans that we always paid on time and finally paid off. DH is really good with money and keeps me in check!

Your high credit score already reflects that you have the ability to pay your credit on time. So, it reallly isn't necessary to have outstanding balances right now....even if you pay them off each month, you probably still have a balance at the time the creditor reports to the bureaus. So, the mortgage company won't know that you're paying them off each month, anyways (Unless you provided the statements which isn't necessary)

It's best to wait until closing to shop for a car. Often times your credit will be "shopped" around for competitive rates. This could put a half dozen inquiries on each credit bureau within a 10 minute period!

A new installment account, new inquiries, etc WILL drop your FICO scores (how many points depends on how thin your file is) which affects lending rates. It takes several months to recover those temporarily lost FICO points.

As far as I know, the only lenders that will "shop" your credit are BROKERS. Try to stay away from brokers and try to stay with a mortgage company that is owned by a bank. The way to find out if you're dealing with a bank owned mortgage company vs a broker is to ask if they are a Direct Endorsement lender. If they are then they're a bank owned mortgage company. If they aren't then they're a broker. Or to be safe you could just go to the bank where you have your checking/savings account(s) at.

The statement about new loans/inquiries dropping your FICO scores immediately and then take months to recover is most definitely true!

It's easier to qualify for a car loan than a mortgage loan, so I would definitely shop for a car AFTER you buy your house.

Also, I work for a bank owned mortgage company and I've never heard the rule of thumb of waiting 6 months after buying a house to apply for new credit. Once you apply for a mortgage you definitely shouldn't do anything (apply for credit, use any open credit cards, etc.) until the day after you close. We are required to pull a "soft" credit report within 48 hours of closing. That means we re-check to see if you have any new debt. It does not show as an inquiry on your credit report because it is a "soft" report.

Hope this all helps and makes sense!!

GOOD LUCK HOUSE HUNTING and then CAR SHOPPING!!!

 

[mommyof2princesses]

We are using our Federal credit union for the loan. My dh has had an acount with them for 20 years and we have used them twice for car loans. They has some excellent rates right now for mortgages.

 

[Carol NJMB]

We just sold our house and our totally debt free. We have one car that we paid off about a year ago. We are house hunting for our next house. We have a pica score in the 800's and more than enough for a 20% downpayment. But, we have no debt....Do you think that will affect us in getting a good loan? We are going to need to buy a new car soon because we plan on living out of town and dh and I will both need cars. Should we buy a car before we try for our loan or wait until we acutally buy our house? We plan on buying and closing in the next 5 months. Any advice? We do have a 2 credit cards..one we do not use anymore and another that we pay off every month. NEither one has ever has a balance carried over from the previous month.

You do not have to "owe" debt to get a mortgage, but you should have open accounts. There is a difference.

A full history of paying back debt is all most people need, even if currently all debts are zero.

Whether you buy a car now or later depends on your individual situation. If you have great credit and no debt and you know that qualifying is no problem, you can buy a car now. A lender does not expect you to not have a car, or to wait months to get one.

Lenders are looking more at possibly unnecessary overspending like opening a bunch of credit cards.

If you do buy a car, get credit approval from a lender before you go to the dealership. Do not let the dealer pass your credit around.

Good luck.

 

[herdtoDisney]

I don't think it would help you any to get a car loan now, as far as getting a mortgage. Dh and I bought our house almost two years ago and we had also sold our old house years before, so we were totally debt free (we drive older cars we buy for cash) and had good credit scores and the 20% down. We got a very good loan, and in fact just refinanced it to another even better rate I think, with your record, you will find it very easy to get approved, from my experience.

Have you tried getting pre-qualified? That way you could get an idea of how it will go for you.

 

[Cheshire Figment]

If you are using your CU for the car loan and for the mortgage there should be no problem with buying the car now. You can stop in and ask them in advance if it would cause any problem. If they even pull a report for the car loan, it will only have a minimal effect on your score. And if the house is several months away any drop you had should have bounced back.

 

[trip]

It's best to wait until closing to shop for a car. Often times your credit will be "shopped" around for competitive rates. This could put a half dozen inquiries on each credit bureau within a 10 minute period!A new installment account, new inquiries, etc WILL drop your FICO scores (how many points depends on how thin your file is) which affects lending rates. It takes several months to recover those temporarily lost FICO points.

I thought they had changed this so a cluster of hits for a car loan would only score as one inquiry.

Will my FICO score drop if I apply for new credit?
If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

 

[Planogirl]

I thought they had changed this so a cluster of hits for a car loan would only score as one inquiry.

Will my FICO score drop if I apply for new credit?
If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

Thanks for posting that. I was hunting for that info too. As backup, I found this on myfico.com:

Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

 

[Pea-n-Me]

I won't approach it from a credit perspective since that seems to have been pretty well covered.

But my thought would be to find your house first on the chance you find/fall in love with/have to have one on your higher end and decide you'd rather settle in to the new house first without the burden of a car payment (if you plan to have one) on top of a new, possibly higher-than-you-thought mortgage payment. (Other things in life also have a funny way of elbowing themselves in at the worst possible times, too.)

Your choice of car may also change depending on whether you buy now or after you have your new mortgage.

 

[tinatark]

Your credit union should be able to use the same credit report for a car loan as for your mortgage - they usually want it to be 90 days or less old. Talk to your loan processor - as long as your debt ratio is where it needs to be, approving a car loan in addition to a mortgage should be pretty simple. Just be sure you're not getting a lower rate due to a lower debt ratio. If they are doing both loans, the potential new car payment/mortgage payment will both be included as monthly debt.