In this post, we’re talking about car payments and how they affect mortgages. As loan officers, we’re in the business of trying to calculate how much a person qualifies for or not. Because car payments are such an everyday part of life for so many people, we wanted to give a brief rundown of how your car payments might be affecting your mortgage purchasing power.

There are two main buckets our borrowers tend to fall into

The first bucket is going to be what we’re going to call the first time home buyer bucket. This is that person who’s buying their first or second home and they’re starting a family. In these cases, often their income is not where they want it to be and their expenses are probably a little bit higher than normal because they’re having to buy cribs and minivans and things like that. For them, these car payments can really impact what sort of home, if any, they can look into buying.

Then we’ve got those who are refinancing. These are more veteran borrowers that’ve been in their home for longer periods of time and have more seasoned income. They might have a travel trailer and two decent cars. These car payments are big and their mortgage interest rate might be sitting at 3.5% and they want to refi, and it’s like all of a sudden, your income is good, but you got some big debt and you’ve got some big car payments, and you’re wondering how this is going to affecting your mortgage. These car payments, when you really break down what it means to your overall budget and how it impacts a mortgage, is a big deal.

The question you should be asking yourself is If you didn’t have your car payment, how much more could you qualify for how much more home could you buy?

How much more home can I get if I don’t have a $250 car payment?

A $250 car payment equates to about a $50,000 mortgage. Not many people are buying houses for $50,000, but what this really means is you can add this to your potential home buying power, your purchasing power. So, with the car payment of $250, you can afford a $200,000 house, but without that $250 car payment, you could afford a $250,000 house. And today, that’s a big deal.

How much more home can I get if I don’t have a $400 car payment?

If your car payment is $400 a month, that equates to roughly $90,000 that could go into buying a new home.

How much more home can I get if I don’t have a $600 car payment?

If your car payment is $600 a month, that equates to roughly $140,000 that could go into buying a new home.

How much more home can I get if I don’t have a $1000 car payment?

If your car payment is $1000 a month, that equates to roughly $235,000 that could go into buying a new home.

We recommend keeping your car payments as low as possible

Especially for first time home buyers, we suggest keeping your car payment as low as possible. After you get established in your home, then go and purchase that car.

If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to team@azmortgagebrothers.com or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

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Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

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