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Which Will It Be...The Car or The House?

Recently there have been a couple of scenarios where I've come into contact with people who have expressed a desire to invest in a home.  They are currently renting, so each of these people would be a first time home buyer.  Upon turning in their loan application to a lender for review, I've gotten word back that both of these people cannot qualify for as much as they would need to buy an entry-level home.

Part of the reason? Car payments for one vehicle in the amount of $400+ per month.  I totally understand that most of us must have a decent car.  But as far as I know, a decent car that adequately suits your needs can be had for closer to $200/month. By purchasing a car with payments of around $200/month, you are saving $200 per month; the money that you would be saving translates to roughly $25,000 in buying power. Something to think about if your desire is to purchase a home in the forseeable future, and would like as much buying power as possible.

Right now there are so many great home buying opportunities out there.  If you've been considering investing in your first home, find a knowledgeable lender and find out what kind of loan/terms you may qualify for, preferably before you splurge on a pricey car.

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You can reach me at 206-595-5866, or e-mail me: LisaBosques@PNWRealty.com

Or visit my website:  www.98146online.com

I am an Associate Broker and Marketing Specialist with Prudential Northwest Realty Associates.   I specialize in homes located in the Burien/North Highline/West Seattle area, and I am here to serve all of your Real Estate needs. 
Your success is my goal!

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Comment balloon 13 commentsLisa Bosques • June 22 2008 09:43AM

Comments

Lisa,

FHA requires a 580 becon score..

What do they require in your area?

Posted by Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission. (Florida List For Less Realty, Inc. Broker/Owner. ) about 9 years ago

Scott, I believe it's 580 as well, but with this score you're put through the gauntlet, so says my lender!

Posted by Lisa Bosques about 9 years ago

great article lisa

Posted by Steve Harless (Legacy International) about 9 years ago

Lisa~ Unfortunately alot of people don't think about that until it is too late.  Maybe some of the buyers out there will read this BEFORE they puchase a car.

Posted by Vickie McCartney, Broker, Real Estate Agent Owensboro KY (Maverick Realty) about 9 years ago

I agree. Too many buyers come in with 2 new car loans and diminishes their buying power considerably. I remember years ago that I've seen mortgage companies ASK what kind of car you have, how old and how many miles. The reason being is that they wanted predict the likelyhood of you buying a new car right after closing on the mortgage!

Posted by James Simmons (RE/MAX Greater Princeton) about 9 years ago

If you ask a car salesman, I am in the process of buying a home, will this affect that? Guess what the answer is, and the end result...

Posted by Frank & Jodi Orlando (Frank & Jodi Orlando Get Us A Home Realty Atlanta Homes Sale) about 9 years ago

HA!!  Just be glad that they had the car when they made loan application and didn't buy it a week before closing.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 9 years ago

Great article.  People need to realize that a car is not an investment and is always a depreciating assets, and until recently houses will go up in value.  The major difference even with houses depreciating is that you will pay down your mortgage and build equity.  Buy the used car pay cash, and get the best house you can.

Posted by Jeremiah Wean, NMLS#132221 (Lakewood Lending Group, LLC (NMLS#132141)) about 9 years ago

   Lisa, I run into this kind of stuff all the time....Usually about ego and "looking good". Never a thought to future goals such as a home, condo purchase.   Got to "look good".  I believe some of those days are now behind us.  Saving and cutting down on monthly expenses is paramount for a new generation to actually own something.

Posted by Kim Harris, Designated Broker/Owner/Sound Realty (Sound Realty) about 9 years ago

Vickie - I hope so.  For those who want to own a home, the time to buy the dream car is after you buy the dream home, and only if you can really afford it.

James, that's not a bad idea.  I bought a new car 4 years ago and, with Subarus being pretty decent cars, I plan to drive it for at least another 8-10 years.  I hate car payments.

Get-Us-A-Home Realty, I'm sure you're right.  When I was in the process of buying my first home I listened to my dad and paid off all my debts in preparation.

Lenn-that's a terrible but familiar scenario!

 

Posted by Lisa Bosques about 9 years ago

Ace-I've never understood why someone would want to spend so much on a car.  I agree with paying cash for a car when possible.  The financial experts say to buy one that's around 3 years old to get a great price and take advantage of those first years of rapid depreciation.

Kim - This is the challenge of anyone who wants to be truly financially independent.  You have to go against the flow and not worry about what other people think.  That will save you a lot of "keeping up w/the Jones'" money that could be better utilized in a retirement fund.

Thanks for commenting!

Posted by Lisa Bosques about 9 years ago

Lisa

In our society people need others to believe they are successful.  They believe a nice car accomplishes that.  unfortunately it prevents them from using their money to build the real weath that they crave.

by the way, Do you have an outside blog that I can add to my Blogroll ?

Thanks and look forward to reading your thoughts on the world of real estate.

Posted by James Wexler (wexzilla.com) about 9 years ago

Good article Lisa!

 

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) about 9 years ago

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