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. Also, when trying to apply for a loan, you’ll have a much better shot to negotiate successfully with lenders if you have a higher DTI than lower.
You can use an online calculator to figure out your debt to income ratio and see if you can do anything to lower it. Always try to have the lowest debt-to-income ratio possible (not just because it makes you look more favorable in the eyes of lenders but also because it will help with your finances).
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.
Before you buy a home (especially right after you buy a car), make sure that you can withstand the additional payments on both purchases. Home-ownership isn’t cheap. Thus, you must be fiscally responsible with your money.
Be sure that you’re confident you can afford a home mortgage before taking one out. For example, suppose you realize that you can barely afford your mortgage loan with the additional loan payment from the car.
The answer to the question “how long after buying a car can I buy a house?” will depend entirely on your financial situation. The home-buying process looks very different for different people, and a car payment can also differ by hundreds of dollars every month.
Finally, you might check your credit reports and realize you have a low credit score, a high debt-to-income ratio, and little discretionary income. It might be a good idea to reconsider buying a car in the first place.