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Sunday, July 07, 2013

New phone, new car, new house.... you decide

Lets face it...there are good bills and bad bills.  Put another way, some debt is good debt while much is bad.  But even the good debt must be balanced and reasonable, right?  Like a car payment for example.

I recently read about a prospective home buyer who applied for a mortgage in the high $200,000s.  The prospective home buyers were glad to find they were prequalified for a mortgage that would buy them a very nice home.

Then they purchased a new car.  Well, they financed a new car.  And the $500+ a month car payments decreased their credit score.  Their monthly total obligations and debt to income ratios went the wrong way - higher.

Then they found out the the cold hard facts.  They were now only qualified for a $95,000 loan.  Their home dreams had vanished!

This brings to light a couple of points people considering buying a home need to ponder.

First, do you need or just want that new car?  A couple of weeks ago I went over to my local Sprint Store. My contract is up on my Blackberry.  I went over to check out the Samsung Galaxy S4 and iPhone 5 and even the HTC One.  Nice phones.  Not really expensive with a new two year contract.

But then I thought about my Blackberry.  I have had it two years or so.  It does what I need.  It works fine.  I left, convinced I had no need for a new faster, better looking phone (Admittedly my Blackberry has a pretty boring look with a keyboard). 

If one really has a need for a new car, is it possible to wait until after you close the deal on the new home purchase?

If you are in a situation where a new vehicle is required, speak with your mortgage person to gain insight and prepare a strategy.   Consider how much car you should buy.  I have found ones attitude toward the automobile's importance determines the choice. 

Still prospective home buyers should remember this... anyone (almost) can get a car financed but not everyone can get a house financed.

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