Lenders consider several factors when qualifying a buyer for a mortgage. Homes and cars are two common large purchases people make during their lifetimes, and the two types of loans can affect one another. A car loan has the potential to change your credit score, debt-to-income ratio and borrowing power. Lenders look at all of these to determine if you are financially fit to take on a mortgage.
Applying for an auto loan slightly lowers your credit score initially. This is not a problem for good credit borrowers, but those right at mortgage lenders’ threshold may become disqualified as a result. You may also not qualify if you missed a few car payments. Other ways to not qualify include having an auto loan that causes your monthly debts to exceed 43 percent of your monthly income and if your auto loan greatly decreases your borrowing power.
Understanding mortgage qualification requires the help of a professional. Andraya Coulter is a California loan officer in the Bay Area that can help you. To learn more about mortgages in Northern California, please contact Andraya Coulter in the Bay Area today.