How much will this hurt? (Buying a car and a house)

[KiriJoan]

Right now DH and I are in the process of getting financing to buy a house. We qualify for a 10 year 0% interest loan that is forgiven at the end of the 10 years as long as we don't sell the house. If we sell the house within the ten years, then we have to pay the money back, but since it's earning 0% interest it's still a good deal. This loan is for $30k to be used as a down payment. We only qualify for this loan because DH is currently unemployed, so our income is just below the line. Immediately after we get the house and get all moved in DH will get another job (even if it's just doing B/S work until something better comes along).

Here's the problem, the program to get approved for everything involves a "Financial responsibility" seminar for 2 weeks. That means we won't even be actually looking at houses for at least another 3 weeks and then even if we find something quickly, we still have all of the inspections and everything else. So we don't really expect to be moving and done with this house buying probably until July... ish.

Now, my car just broke down. I've had issues with it for the past 6 months and it just up and died on me about 2 weeks ago. So, I've been driving DH's truck. Well, now THAT just died. (bad luck after bad luck) Right now I'm borrowing my MIL Jeep that gets about 12 MPG and spending over $125 a week in gas to get to work and back. So, I desperately need a new car. I'm going to buy one for myself and DH is going to wait. I'm just waisting time right now because I'm concerned how it's going to look if I go out and buy this car.

I've never had to get financing for a car before, I've always just paid cash. Now, I'm looking at around a $10k loan because I don't have time to save up for buying this car. With everything that's going on and the economy the way it is, we just can't do it. But I'm worried that we'll be rejected for the home loan because we just took out a car loan 2 weeks before! This whole thing is making me sick. If it wasn't for the $30k down payment assistance, we wouldn't be able to afford a home for a few more years. And where we are, we can buy a good 3/2 house for less than $150k. But I won't be able to make it much longer spending so much on gas a month.

So, very long story short, how much will it kill me to be taking out both loans so close together? Should I wait until I get approved financing for the house before the car? Or the other way around?

My CR is about 730 last I checked and DH's is 670.

[pryan67]

not sure how this works...

so you get a loan of 30k...0 interest...what are the payments? Or do you not have to pay it back at all?


if there aren't a lot of inquiries related to the car loan (there SHOULD be only one, but lots of dealers shotgun your app to a lot of different lenders...which means you could get 20 or more INQs)...then you should be OK, since the loan probably won't be reporting yet...BUT...the time you have to worry about it would be at closing when they pull your reports again...


BUT...another concern I'd have would be for the payments....how close are you gonna be without the car? Can you afford it, or would you be better off getting an even cheaper car...just for now til DH gets another job?

[KiriJoan]

I don't have to make payments on the loan. If I move within 10 years, then we have to pay it back in a lump sum, either at the time we close on selling the house or the time we no longer use it as our primary residence.

I'm going to be doing my financing through AAA. Will that cut down on the amount of inquiries I get? AAA can offer me a rate of 4.95%.

As far as payments go, DH and I have throughly discussed this. It's scary, of course, but we should be ok. Right now we're paying $1,200 a month in rent. If I'm not mistaken, a mortgage of $120k will cost us a little over a grand with insurance and taxes (at least that's what the bank quoted us). We're still making due with the money we're living on now, it's just gas is KILLING us. I'm hoping that even a $200 a month car payment + gas will be lower than what we're spending just on gas right now because my "new" car will have much better gas mileage.

[pryan67]

yep...AAA will likely NOT shotgun your report....

you can run the numbers on the mortage yourself at bankrate.com...they have calculators there for just that sort of thing....

[kaplanham]

Buying a car is a bad idea until after you purchase the home. The car loan payment will be factored into your overall ability repay the loan and increase yor debt-to-income ratio. in addition, you take a hit-not big-the first six months of your car loan. if at all possible, by a used car cash or but don't get a car loan..your scores can survive the ding but your income vs debt can't.


Right now DH and I are in the process of getting financing to buy a house. We qualify for a 10 year 0% interest loan that is forgiven at the end of the 10 years as long as we don't sell the house. If we sell the house within the ten years, then we have to pay the money back, but since it's earning 0% interest it's still a good deal. This loan is for $30k to be used as a down payment. We only qualify for this loan because DH is currently unemployed, so our income is just below the line. Immediately after we get the house and get all moved in DH will get another job (even if it's just doing B/S work until something better comes along).

Here's the problem, the program to get approved for everything involves a "Financial responsibility" seminar for 2 weeks. That means we won't even be actually looking at houses for at least another 3 weeks and then even if we find something quickly, we still have all of the inspections and everything else. So we don't really expect to be moving and done with this house buying probably until July... ish.

Now, my car just broke down. I've had issues with it for the past 6 months and it just up and died on me about 2 weeks ago. So, I've been driving DH's truck. Well, now THAT just died. (bad luck after bad luck) Right now I'm borrowing my MIL Jeep that gets about 12 MPG and spending over $125 a week in gas to get to work and back. So, I desperately need a new car. I'm going to buy one for myself and DH is going to wait. I'm just waisting time right now because I'm concerned how it's going to look if I go out and buy this car.

I've never had to get financing for a car before, I've always just paid cash. Now, I'm looking at around a $10k loan because I don't have time to save up for buying this car. With everything that's going on and the economy the way it is, we just can't do it. But I'm worried that we'll be rejected for the home loan because we just took out a car loan 2 weeks before! This whole thing is making me sick. If it wasn't for the $30k down payment assistance, we wouldn't be able to afford a home for a few more years. And where we are, we can buy a good 3/2 house for less than $150k. But I won't be able to make it much longer spending so much on gas a month.

So, very long story short, how much will it kill me to be taking out both loans so close together? Should I wait until I get approved financing for the house before the car? Or the other way around?

My CR is about 730 last I checked and DH's is 670.

[KiriJoan]

Yeah, that's what I was concerned about, but the problem is I'm killing myself here with no outcome really. I'm going to be going into debt each month (about $50 worth) just to pay for gas, even with cutting out all of the "extras" in our lives for the next 3 months. And where we live, in the Jeep it's going to be at least half a tank of gas (about $25 worth) to get anywhere. Our parents, our friends, the library.

Bleh, it's just a sucky situation to be in. We can NOT increase our income because of the $30k loan (we're like $400 within the limits), but yet now we have no cars to go make income in the first place! I don't even know what I'd do if my MIL needed her Jeep back (right now she's driving a motorcycle to and from work).

[guilliam]

Buying a car is a bad idea until after you purchase the home. The car loan payment will be factored into your overall ability repay the loan and increase yor debt-to-income ratio. in addition, you take a hit-not big-the first six months of your car loan. if at all possible, by a used car cash or but don't get a car loan..your scores can survive the ding but your income vs debt can't.

This is what I was thinking too. Is there some way you could borrow the money from a family member etc to fix one of your cars for now? We were in a similar situation when we bought our house. Needed to make a large purchase but didn't want to hurt our debt to income. My mom took out the loan for us and then we paid it off (but in our case, we knew we had $$ coming from another source and would be able to pay the loan off in 2 months)

[KiriJoan]

This is what I was thinking too. Is there some way you could borrow the money from a family member etc to fix one of your cars for now? We were in a similar situation when we bought our house. Needed to make a large purchase but didn't want to hurt our debt to income. My mom took out the loan for us and then we paid it off (but in our case, we knew we had $$ coming from another source and would be able to pay the loan off in 2 months)

No. My car will cost over $5k to fix (and for a 13 year old car with over 100k miles on it, it's SOOOO not worth it) and DH's truck is beyond repair. My side of the family essentially gave me the boot when I turned 18 and DH's mother owns her own business which is hurting because of the economy.

[curtisekarr]

Tread carefully KiriJoan!! There are numerous traps that lay ahead on the path you wish to go down. First of all home ownership is MUCH more expensive than you think. If you can't afford gas right now, what happens when....there's just too many potential problems! When you're in the midst of money-issues is not the time to go purchasing a house. Get your financial house in order first, then worry about a home purchase.

Renting is the thing to do right now. Why $1,200 anyway? Are you living within your means? Forget this stupid home loan and tell hubby to get off his arse and get a job - or three!!

$10K car loan?? Live within your means...get a $3-4K Toyota Corolla and maximize gas mileage.

"Financial Responsibility" seminar for 2 weeks?? Go out and both of you work your arses off for the next two weeks, that'll teach you financial responsibility. Then re-read this post. Then PM me if you have any further questions.

"I'm looking at around a $10k loan because I don't have time to save up for buying this car. With everything that's going on and the economy the way it is, we just can't do it. But I'm worried that we'll be rejected for the home loan because we just took out a car loan 2 weeks before! This whole thing is making me sick. If it wasn't for the $30k down payment assistance, we wouldn't be able to afford a home for a few more years. And where we are, we can buy a good 3/2 house for less than $150k. But I won't be able to make it much longer spending so much on gas a month."

OMG will you please re-read that paragraph!! Please.

[pryan67]

good call curtis....

if you're THAT close to the edge...you're walking a VERY thin line...


with a 150k mortgage (adding in closing costs, points, fees, etc to the 120 mortgage you're thinking of)...at 7%...is 997....that's principle and interest only...

add in PMI...another say 50 a month...what are taxes in your area? divide that by 12 and add 20% to that...to cover the inevitable increases...call it 300 a month...which is pretty low in most areas of the country...

now your car loan...that's another 200 a month roughly at 7%...

so can you swing an extra 350 a month?

if the taxes are NOT that high...that money will be spent on other incidentals that happen when you own a home...association fees might apply, etc....


when does your lease expire?

What does DH do for a living? How tough will it be for him to get a job in his field....what about another field just for now?

[KiriJoan]

DH is a teacher, so come August he'll have another job, which is why we'd need to do the class now because afterwards we will no longer qualify.

There are only 2 apartment complexes in the area I live in, which is flooded with new build homes. Even with choosing the cheapest complex, we're still being hit with a $1,200 a month rent, which is nuts.

The Financial Responsibility class is just a pre-req. for getting the loan. It's an hour long class, at night, for two weeks. It just covers how to avoid all the stupid crap people end up doing.

You keep telling me to live within my means, and I am. The problem is that we're so used to paying cash for everything that the idea of a car loan frightens me. It just came so suddenly we aren't able to save up the cash to buy a car. No one expects to have BOTH their cars die in the same week.

The $120k loan was WITH figuring in all of the things your discussing. The average home in our area is selling for about $133k. Take out the potential of a $30k downpayment and that's only $103k. Taxes are relatively low in our area (for the time being) and we were quoted $70/month for what we were looking at... nothing near $300. My mom has a huge house on prime real estate in Orlando and doesn't even pay $300/month on taxes.

Our lease expires in August, where our rent will inevitably go up at least another $100 (what apartment DOESN'T raise their rent each year). At that point, DH will be teaching again and we'll have more money, but yet the chances of buying a home will be further away because it would take us AT LEAST a year to save up something even close to $30k for a down payment. Being a teacher, he probably takes in only about $30k after taxes a year, so we'd have to take his entire income and put it into savings to come up with something someone would have given us.

Right now we're THAT close to the edge because in the past 3 weeks I spent $600 on a car that ended up not being able to be fixed. So that's essentially me throwing money out the window, the car left stranded 1,000 miles from home which had all of it's extra costs trying to stay there than find away back home, and then the obscene amount of money I'm spending on gas just to get to and from work in my MIL's jeep.

All I wanted to know what house this was going to effect my credit rating. I understand my own financial ability. I just turned 22 YESTERDAY, I'm married, debt-free (despite us BOTH going to college without our parents help and no student loans), and responsible. I'm sick of spending so much money to rent a crappy apartment when I could be building equity on a home. DH and I have planned on taking this class for months. We purposely kept him unemployed (I'm an Accountant and make more money than him) so that we could take this class and take advantage of what it had to offer. My SIL is a lawyer and did the same thing last year while she was still in law school and had only a part-time internship. Unfortunately we hit a string of bad luck and ended up with no cars 2 weeks before we were scheduled to take this class. Our savings was only intended to take us through August, but the extra money that it took to fix a nonrepairable car and the extra money on gas (I was only spending about $150/month in my prior vehicle) is causing us to eat through our savings much faster than we feel comfortable with.

[pryan67]

ok....so you have until August to find a home, get the loan, etc...that's what I wanted to know...what sort of time frame you're looking at...

does DH know where he'll be teaching? Does he have a contract yet? I'm unfamiliar with FL teacher unions, etc...but at least here in Illinois, they're VERY powerful, and typically get paid year round...perhaps look into that...salaries seem low down there too...up here an average first year teacher makes about 50k (plus all the bennies that they get...which are outrageous IMO)

no one is really saying you can't do what you want...but what we ARE saying (or at least I'm saying) is to make SURE it's what you want and that you can avoid the pifalls that so many people have fallen into...

what's the housing market doing by you? Up or down? That would be good to know so that when you DO negotiate the price of the new house, you can take that into consideration...median home value was 168k or so in 2005...you don't want to buy while the market is on a big downswing...so just keep that in mind...you don't want to have negative equity at the start...



the car loan shouldn't hurt you much...UNLESS it reports prior to you applying for the home loan...and if they pull your credit at closing (which happens often..), they may question it...

do you have family you can borrow the cash from?




Happy birthday yesterday BTW....

[AndreaInNC]

Have you checked around to see how much it would cost to rent a car for a month or so? If you call around to some of the local car rental places and explain your situation, it might not be that much. Especially if you figure in how much you are spending on gas right now. Or look around locally for a cheap car just to get you through for the rest of the year.

You shouldn't have to worry about PMI if you're putting down 20% or more as a downpayment.

I'd say not to buy the car as it will impact your credit rating - and you might now know about it until it's too late and you lose the assistance that would be available to you. That's a huge risk.

FYI - I have a mortage of 146K and with taxes and insurance factored in, my payment are a little for 1K a month.

And on a side note, I got a call from my mortgage company last night to see how I was doing because they were aware of all the financial problems that are facing so many people. How odd is that?

[MelissaS]

Isn't it fraud to get the loan based on your current income when you know that immediately after you receive the loan your DH will be working? Something doesn't seem right about that.

This "loan" is for low income families, if you won't qualify when your DH goes back to work (immediately after you get the money)then it just doesn't seem right for him to intentionally not work just to qualify for the "loan".

[ryejay98]

I'm just having a hard time understanding the $1200/mo rent when houses are $120k.

Around my area, rent for a 1BR is $1200-1400/mo ... but houses are also $500-600k.

Housing that cheap... seems to me rent would be cheaper *shrug*

Agree - why 10k car loan? Get a used toyota or something that gets good mileage and lasts forever.

[pryan67]

rent isn't all that high...or unreasonable...

rent down there I see for 600-1600 a month...

but then again...that's not really what was asked...I questioned some of it because of the apparent contradiction....they need the loan, but they can afford more each month....and that was explained (the potential fraud isn't our concern...but if the OP is curious, she'll ask about the potential penalties should it be discovered)

[wild4mn]

Is it an option to move to an apartment closer to your work? You say it takes half a tank of gas to get anywhere, why not move close enough to take a bus or bike?

[pryan67]

Is it an option to move to an apartment closer to your work? You say it takes half a tank of gas to get anywhere, why not move close enough to take a bus or bike?

the cost of moving may offset any savings in gas though...

the ULTIMATE goal here...I believe...is that the OP and her DH not lose money in the deal...