How Buying a Car Reduces Your Purchase Price

Did you realize that if your dishing out monthly payments for a new car it can make a huge difference in the price that you will be approved for purchasing a house? For example, hypothetically you earn $6000 a month and you have a car payment in the amount of $500. Using a common interest rate of 8.0%, you would only qualify for the approximate amount of $65,000 less than you would have if you was not already paying the monthly payment for the car.

Even if your feeling is that the car payment can be afforded, mortgage companies will approve your mortgage based on their strict guidelines, not what you think you should be approved for. Try to not become overwhelmed or discouraged, however. You should definitely still take this time to become successfully pre-qualified by one or more lenders.

The next step would be for you contact a loan officer to become prequalified for a mortgage loan. You will be required to state your desired price and the amount that you will be able to put down initially. You will need to provide proof of your income which may include copies of previous W2 forms and pay stubs. The loan officer will often methodically crunch the numbers (in person, over the internet, or over the phone). 

However, if you have not already committed to buying a car, one thing you should remember is while it may be great to have a new car to drive try thinking ahead for bigger purchases and if its really a necessity. Think about how buying a car may effect the outcome of your home purchase. In long term aspects a house is by far the more important of the two purchases in considering whether to buy a home or a vehicle.

For those who have a limited or fixed income you may qualify for an amount lower than those who are making more than you so its important to keep your income for important things such as buying a home. If your able to live without adding any additional payments that you must pay out monthly the better off you will be financially.