Ready to learn about some of the most important things you'll need to know when buying a car and a house? This post aims to answer all those questions and more, providing you with a straightforward guide to making these two large purchases. Let's get right into it.
When thinking about buying a car and a house, there are a few essential factors that you should keep in mind. After all, you don't want to have completed the purchases and realize that you unexpectedly can't make the monthly payments.
Your Credit Score
Before buying a home, you'll want to ensure that you have good credit. More specifically, you'll want to make sure that your credit history is as good as it can be and that your credit score is in perfect shape. Unfortunately, buying a car can negatively impact both (in the short term).
Your Debt-to-Income Ratio (DTI)
Your debt to income ratio is a measurement of how much of your income needs to go towards paying off liabilities. Lenders look at this measurement to determine the loan rates they will apply to the house's purchase price.
This factor ties to your debt-to-income ratio, but you add debt to your finances when you buy a car. This factor, combined with an additional mortgage, means that you will have a tiny cushion to withstand any shocks to your finances compared to before you made the two purchases.
Does Buying a New Home Affect Your Credit Score?
Though being a responsible homeowner can indeed help you build your credit score over time, in the short term, your credit score can drop quite significantly (up to 14 points!).
How Is a New Auto Loan Different from a Home Loan?
A car loan and a mortgage are similar in many ways, including that both have collateral behind them (one is your car and the other is your house). The main difference is that you will make mortgage payments amortizing.
Does Leasing a Car Affect Your Credit Score? If you make all the payments on time, leasing a car can positively impact your credit score. Plus, a lease is a different type of credit that you can add to your credit mix, further benefiting your credit score (the more types of credit you have, the higher your credit score).
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