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couple questions about finances...

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Old 11-15-2010, 08:38 PM   #1
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couple questions about finances...

ok so my life has kinda changed, dramatically. so dramatically that i need to get rid of the mustang gt 5.0 i just bought brand new back in september. no i am not expecting a kid. i am moving, and where i am moving to i need a truck. so this brings me to a couple questions.

1) i have read/heard that if you buy a vehicle a few months before you try to buy a home it can really effect wheter or not you can get a home loan. now i found a house for $90,000 and my credit score is somewhere above 725. but where i just bought my car a few months ago, can i still get a good loan?

2) my car, again, is 2 months old. can i trade it in so soon or will the bank i financed through not let me or what? i am going to trade it in straight up hopefully. i am looking at some new tacomas, tundras, or 4runners.

3) also, if the question above is answered in a certain way, should i wait until after i buy my house to get a truck or can i go ahead and go with it now?
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Old 11-15-2010, 10:23 PM   #2
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Quote:
Originally Posted by meteoraman2514 View Post
ok so my life has kinda changed, dramatically. so dramatically that i need to get rid of the mustang gt 5.0 i just bought brand new back in september. no i am not expecting a kid. i am moving, and where i am moving to i need a truck. so this brings me to a couple questions.

1) i have read/heard that if you buy a vehicle a few months before you try to buy a home it can really effect wheter or not you can get a home loan. now i found a house for $90,000 and my credit score is somewhere above 725. but where i just bought my car a few months ago, can i still get a good loan?
It depends on the loan your looking to get, your credit, your income, your overall debt and tons of other factors. Not only is your credit score used, but everything else ON that credit report. If you have too many credit cards open and 'usable' - they may look at that as potential debt.

Quote:
Originally Posted by meteoraman2514 View Post
2) my car, again, is 2 months old. can i trade it in so soon or will the bank i financed through not let me or what? i am going to trade it in straight up hopefully. i am looking at some new tacomas, tundras, or 4runners.
Is the Mustang your first car? Again, depending on the car loan - you may or may not pay penalties for getting out of the loan too early. You have to contact your bank and ask.

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Originally Posted by meteoraman2514 View Post
3) also, if the question above is answered in a certain way, should i wait until after i buy my house to get a truck or can i go ahead and go with it now?
Again - depends on the loan your trying to get. How much are you borrowing? How long are the terms? What's the intereste rate?

Don't forget...homes come with BIG responsibilities and big $$ aside from the loan. Are you ready for such responsibility? I mean....when you move into a home, there's ALWAYS $$ to be spend to take care of things. A home is a HUGE investment and you want to take care of it.
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Old 11-16-2010, 06:09 AM   #3
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The bank you financed the mustang thru isn't interested in anything except getting the payoff, so if you work a trade for a truck you will have to cover that loan with whomever you buy the truck.
Depending on what you owe on the first note that will get covered (hopefully) in the trade-in.
Anything over is in your favor towards the new or used truck.
Anything under is negative equity and will get rolled over into the new note (ie. bank loan).

I am sure there are some finance/real estate gurus that can help with letting you know how that transaction may or may not effect getting a home loan.
My experience is to wait for all major purchases until after you close on the house.

Debt to income ratio is huge too when it comes to securing a home loan, meaning most banks/mortgage companies have a percentage they like to see & anything over that percentage comes off what you able to borrow.
If you put less than 20% down, most banks/fianance companies will charge PMI which is basically an extra fee to ensure you pay. I know it sounds nuts...but get use to fees...points...taxes...insurance...it all adds up.

Good luck with the purchase, home ownership is an exciting adventure if planned for. Looks like you are trying to do that!
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Old 11-16-2010, 06:29 AM   #4
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Damn, I wished I could find houses for $90k. My wife and I paid 405k for a Cape Cod. Damn NJ. Personally, I would go for the home loan first. As was previously pointed out, they look for a debt to income ratio. I think you're more likely to squeek a car loan past than a home loan. We bought our house a year and a half ago and they put us through the ringer on the approval process. Hopefully things have loosened up a little. When we did ours, they looked for the following:

- 20% Down Payment
- Credit Scores Over 700.
- Debt to Income Ratio (I forget what the specific ratio was).
- Proof that our down payment funds were in our accounts for at least 90 days prior to closing.

At the time, I was having a hard time selling my condo so I had to pull it off with that on my credit as well. Thankfully my wife (then fiance) didn't have any other debt than the condo and her car payment.
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Old 11-16-2010, 06:36 AM   #5
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Quote:
Originally Posted by Janster View Post
If you have too many credit cards open and 'usable' - they may look at that as potential debt.
He's right, I have excellent credit but I had an 8 grand loan out plus my truck loan. When i went to consolidated just to save a lil on interest they insisted I closed my 2nd and 3rd Credit cards because of the potential risk. all 3 of my cards had a 5 grand limit but I hadn't carried a balance on the last 2 in 4 years. Never used em so i didn't care about closing em.

On a side note, I opened them for those 15,000 points deals if you open a card. when they closed them out, they paid me out the points balance on both cards. worked out to be a free 200$.
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Old 11-16-2010, 09:10 AM   #6
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Quote:
Originally Posted by BrokenTusk View Post
He's right, I have excellent credit but I had an 8 grand loan out plus my truck loan. When i went to consolidated just to save a lil on interest they insisted I closed my 2nd and 3rd Credit cards because of the potential risk. all 3 of my cards had a 5 grand limit but I hadn't carried a balance on the last 2 in 4 years. Never used em so i didn't care about closing em.

On a side note, I opened them for those 15,000 points deals if you open a card. when they closed them out, they paid me out the points balance on both cards. worked out to be a free 200$.
I belong to a credit reporting service that gives advice on how to improve your credit score. Having a $5K limit with nothing on it is actually better for your credit score. If you have too many then it's could be bad because there's a risk that you'll use the credit all at once and leave the bank hanging. But you should have one or two with a large limit and a low balance because it shows you as a responsible credit user.

If you have a smaller card but use more than 50% of the allowable balance, that can also hurt your score.

So if you have one credit card with $2500 limit but with a 50% balance and one credit card that's $5000 limit and no balance, you should transfer the balance to the $5K card and close the $2500 card.

Also, it's good to have a high limit card remain open for more than 2 years. A $5K card with no balance that has been open for two years or more is one of the best things for your credit score.



Things that can hurt your score include:
  • Too many inquiries; it looks like you're shopping for credit.
  • Balances too high on revolving accounts (credit cards).
  • Using more than 50% of your available credit on a revolving account.
  • Using too much of your total available credit.
  • Getting your financing through financing companies vs a bank or credit union. This one is especially bad with one of them (Equifax, I believe) because it never comes off your report. I have one from 25 years ago that still brings my score down with them.
Positives:
  • Using less than 10% of your available balance on revolving accounts.
  • Never late on a payment.
  • High average available credit (>=$5K).
  • Revolving account open for more than 2 years (shows your reliability over time).
Car loans don't effect it too much because it's a secured loan. I did a what-if scenario. I had money to pay off my car or pay off my credit cards. Paying off the car had little effect on my credit score. Paying off the credit cards bumped my score by 22 points.
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Old 11-16-2010, 11:04 AM   #8
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Evil Monkey you make a lot of sense, I wonder why I was asked to close out the remaining two then? my bank (RBC) said it would be benificial for getting a lower interest rate. While I have always had a car loan since I was 18 (I keep Upgrading every few years), I have never missed a payment.
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Old 11-16-2010, 11:08 AM   #9
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Quote:
Originally Posted by BrokenTusk View Post
Evil Monkey you make a lot of sense, I wonder why I was asked to close out the remaining two then? my bank (RBC) said it would be benificial for getting a lower interest rate. While I have always had a car loan since I was 18 (I keep Upgrading every few years), I have never missed a payment.
It's possible that they themselves are worried about their own risk. But for a credit score, the other option is better.

Bank of America reduced the limit on one of my cards for a similar reason. I had a $10K limit with no balance and they dropped it to $1500. This was right after the big bank fiasco. I've kept it only because it's been a long term card. Eventually they'll bring the limit back up.
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Old 11-16-2010, 11:16 AM   #10
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hmm. maybe I should apply for a second card then, couldn't hurt really. Plus aways good in case of a major emergancy. Had to fly cross country on no notice a few months ago. credit cards have their uses.
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Old 11-16-2010, 03:19 PM   #11
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Originally Posted by xJuice View Post
haha how'd i know this was going to get brought up. believe me, i dont wanna get rid of this stang. but i have a 1993 beat up, oil burning corolla as my backup vehicle. and where im moving to, i need a dependable 4wd vehicle. so this aint so much an insert foot in mouth i told you so moment, its a life changed kinda thing lol
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