Getting a Car Loan after Buying a House

Get Car Financing
Even with poor credit.

By

Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


, Contributing Writer - May 31, 2018

If a consumer needs to finance both a home and a vehicle, financial experts typically advise them to buy the house first because auto lenders tend to be more lenient than mortgage lenders.

Trouble with Auto Financing After Buying a House

For most consumers, purchasing a home is the biggest financial commitment they'll ever make, and buying a car comes in second. Some consumers run into trouble when applying for an auto loan immediately after purchasing a house. In fact, if they have less than perfect credit, a new homeowner may need to postpone auto financing until after their credit scores – or income – improves.

There are three major reasons why consumers with lower credit scores may get turned down for car loans after buying a house. Auto financing applicants might receive denials because of an insufficient down payment, their debt to income (DTI) ratio, or their payment to income (PTI) ratio.

What is considered a “good” down payment varies. For new cars, many experts suggest putting down 10 to 20 percent of the vehicle’s purchase price to offset the depreciation that occurs during the first years of ownership. Also, providing a larger down payment allows buyers to finance smaller amounts and save money in interest charges over time.

For vehicle buyers with damaged credit and higher interest rates, reducing the loan amount is especially important. Not only does it save them money, but by reducing lender risk, it improves their approval chances. In addition, a larger down payment also reduces their monthly payment. If their PTI ratio cannot top 15 percent, this can mean the difference between an approval and a denial.

Yet, if a consumer contributes most of their available cash toward a down payment on a home, it’s unlikely that they’ll have much left to put down on a vehicle. Lastly, by adding a mortgage payment to their monthly recurring bills, their DTI ratio is typically higher. Adding a car payment may push their total debt over the amount considered acceptable by most lenders. Again, DTI isn’t always crucial for vehicle buyers with good credit. However, the special finance lenders that extend financing to consumers with damaged credit typically want to see a DTI ratio of 50 percent or less.

Buying a Car with Bad Credit

Consumers with less than perfect credit should remember that even the lowest credit scores are fixable. They just need time, effort, and the right strategy. In fact, one of the best ways to get a jump on credit repair is with a bad credit auto loan.

After getting approved for a loan to finance the purchase of an affordable car, buyers with credit issues have an opportunity to gradually increase their credit rating by making timely payments. And, believe it or not, getting approved for car financing with bad credit doesn't have to be hard.

At CarsDirect, we understand that good people don't always have great credit. So, for over 20 years, we've helped credit-challenged car buyers find financing. We can match you with a dealership in your area that can work with challenging credit situations.

Signing up for our no-cost, obligation-free service only takes a few minutes. Go ahead and fill out our simple auto loan request form to get started today.

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Sell Your Car

We will buy any car, running or not, with or (in most cases) without the title.

Get My Price

Need a Car Loan?

It only takes a minute.

, Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com