For borrowers who want to buy a new car, it's important to consider how this will affect their chances of obtaining credit. New cars often come with higher monthly payments and larger down payments, which can reduce the amount of funds available when applying for a mortgage. Additionally, lenders may judge borrowers more harshly if they recently purchased a new vehicle, as it may signify short term financial responsibility rather than long-term financial stability.
When applying for a mortgage, borrowers should take into account recent and upcoming large purchases. This includes buying a new car, as the payments associated with these purchases can be an impediment to being granted a loan. In addition, those who recently bought a car may be judged more harshly by lenders due to it potentially signifying short-term thinking. Borrowers who are looking to get approved for a mortgage should be aware of how buying a new car affects the process and be prepared to answer any questions posed by lenders.
The first step in understanding how buying a new car will affect a mortgage application is to examine the costs associated with the purchase. A new car typically requires a large upfront payment, typically 20% of the total cost of the vehicle, as well as a monthly payment of a few hundred dollars spread over 36–72 months. These additional expenses can quickly add up and reduce the amount of funds a borrower has to apply toward a mortgage.
In addition to the costs associated with buying a new car, applicants should be aware that lenders may view them differently if they recently purchased a vehicle. While a new car may not be seen as inherently irresponsible, it may be taken as a sign that the borrower is not focused on their long-term financial stability. As such, lenders may be wary of extending credit to someone who has made a large purchase recently. When applying for a mortgage, it is important to answer any questions related to large purchases truthfully in order to demonstrate financial responsibility.
When making a large purchase such as a new car, it is important to consider how this will affect your chances of getting a mortgage. As previously mentioned, the costs associated with the purchase can reduce the amount of funds available to put toward a loan. Additionally, lenders may view borrowers differently if they recently bought a new car, judging them based on their short-term outlook rather than long-term plans. When applying for a mortgage, borrowers should be aware of how their recent purchases might influence their application and be prepared to answer any questions in order to demonstrate financial responsibility.
This article was contributed on Jul 28, 2023
