Would leasing a car impact my ability to get a home loan?
I am planning to buy a house within the next few months and, because of some unanticipated events, I am in need of a car. I am considering leasing a car for $150 a month. Would leasing a car impact my ability to get a home loan? I have no loans at this point.
yes the car payment would count against your debt to income ratio.
Depending on your income and how much you are planning on spending it may not be a big deal. On the other hand if you are stretching to buy a house, it may be the difference between qualifying for the home loan you want and not.
You may want to talk with a mortgage pro to get pre-qualified, and to see how much that car payment will matter on your personal mortgage application needs.
Best of Luck
David Rae- The Fab Financial Guy
There would likely be some impact on the maximum amount of the loan for which you will be eligible. Most lenders will make a loan large enough so that the family’s debt service to income ratio goes as high as about 43%. If you leased the car, the inclusion of this payment reduces your maximum mortgage amount by about $30,000. The additional $150/mo car payments effectively "crowds out" otherwise affordable mortgage outlays.
Where did the $30,000 come from? The basic assumption here is that your likely mortgage can be made at a rate of 4.5% for 30 years. Note that a relatively small SHORT TERM auto loan can have an outsized effect on the amount of long term borrowing that one can do.
The simple answer is yes, but you will want to consult with a mortgage professional to see to what degree this will affect you.
Typically this lease will affect you debt to income ration (what your debt payments are compared to your income in a percentage format) and your credit. Depending on how much you are going to put down on the new home (which you have not disclosed) could offset your debt to income ratio. The larger the down payment the less of the impact. In addition, since you now have this debt (the lease) it is essential that you make your payments and do so on time. By showing you make these payments as scheduled it should have a positive impact on your credit score.
It is truly important to know the full picture here in order to appropriately advise you. As suggested earlier, schedule a consultation with a mortgage professional to review your options and impact. Best of luck with the home purchase!