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How does getting a car loan affect your chances of mortgage approval?
I want to get a car loan, but I'm also shopping around for a home. How does a car loan affect your chances for getting a mortgage? Should I do one before the other?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congratulations on hitting a big milestone! Buying a car and home is exciting—but it can feel like a lot to balance. No worries, though; there’s no one right way to do things, and the order of your purchases depends primarily on your current circumstances!
- The hard inquiry can lower your credit score by five to 10 points
- The new debt can increase your debt-to-income ratio
- A car loan can affect preapproval for a mortgage if you already have it
From this perspective, buying a home first is usually the better option, but several other factors are at play. So, you need to answer these questions:
- Are you buying a house soon? Or is it more speculative?
- Do you need a car now? Or can it wait?
- Will buying a car keep your debt-to-income ratio below the 43% threshold? Will the mortgage put you over this amount?
If you can answer these questions, you can make an educated decision on which order to make your purchases.
If you’ve decided to buy the car first, remember that you’ll need insurance! The easiest way to take the stress out of insurance shopping is to compare rates through the
Jerry
app—we’ll get you quotes from different top-of-the-line providers so that all you need to do is choose the plan that works best for you! (That way, you can save yourself money and a headache.)Best of luck with the house and car—and congrats again!
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- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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