So, you want to buy a house but you want a new car too. What you do first can have a big impact on your plans If you buy a car first, how much will that car payment really cost you?
Well, when you are buying a house, that car payment can cost over $100,000. In today’s market for every $4.25 you spend on a monthly car payment; you lose the ability to borrow a $1000 for your new home.
That doesn’t sound like a lot until you figure a car payment can easily be $500 a month. $500 when divided by $4.25 translates to a reduction in your borrowing power by $117,000 on a 30-year mortgage!
With market prices rising you could suddenly only afford $250,000 on a house selling for $367,000 just because you bought a car first.
But guess what? The banks don’t care what you buy after you close, so buy your new car after you buy your home. Just make sure you budget correctly; you might find your old car works just fine in your new garage.