Buying a car while preparing to buy a house can change your mortgage numbers. Even if your new payment feels affordable, a lender must review your monthly debt obligations alongside qualifying income and the proposed housing payment.
Understand debt-to-income ratio
Debt-to-income ratio, or DTI, is monthly debt payments divided by gross monthly income. A new auto payment can increase that ratio. The exact effect depends on your income, other debts, mortgage program, and the payment on the car you are replacing, if any. A similar payment may have a smaller impact than a much higher payment, but you should not assume there is no effect.
Timing matters
Financing a vehicle can also change your credit profile and use cash you planned for closing. If you are preapproved or under contract, tell your mortgage lender before signing a new loan or lease. Ask for the purchase scenario to be recalculated with the proposed payment. Keep the vehicle contract and payoff information if you trade in an existing car.
Make one coordinated decision
Compare the urgency of the vehicle purchase with your home purchase timeline. It may be possible to buy both, but you need numbers based on your actual application. A quick conversation before you sign is much easier than trying to solve a financing change near closing.
Contact me if you are shopping for a home in Atlanta and considering a car purchase. We can review the proposed payment's effect on your mortgage scenario.
Source: CFPB: What is a debt-to-income ratio?.