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Bad situation is MUCH better now

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Have 2017 Fusion Hybrid Titanium. Love it. Owe $15800, but worth maybe $10500 after 14 months at 28% interest. Now, I want to upgrade to MKZ Hybrid... Escape Hybrid was nice but can't get cooled front seats. 

 

I found cars at $21-24k. Found new at $34k. Score should be close to 700 on July 1. I paid $3000 on credit cards this month. The online calculators say $40k at 5% 84 mo is better than $28k at 15% for 72 months. Id rather NOT go brand new as two MKZ hybrids had less than 15k miles on them. 

 

Whats going on in the Auto credit world? I'm thinking Capital One and Ford would pick me up easy. I'm $65k/yr. I don't mind driving to buy out of state if necessary. I'm about to buy a house too. 

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Right now credit is tighter and car prices are higher (demand and inventory constraints on both new and used).

 

Your ventilated seats are going to cost you the $5,300 in negative equity plus a premium on the price of the next car.  And sales tax.  And probably higher insurance premiums.  And if you trade into a newer/more expensive car, your depreciation costs are going to skyrocket.

 

How much are ventilated seats worth?  An extra $10,000?  $12,000?  $20,000?  $1 million?  That's a serious question.  Put a number on it, and then do the math.

 

Smarter financial move would be to refi your current vehicle into a better rate for the shortest term you can afford, and kick in whatever money is necessary to get the LTV down to a level you can get approved at a reasonable rate (110% ?).

 

Are you putting at least 20% down on the house, and will you have at least 6-12 months of expenses left in savings after you move in?  

 

 

 

 

 

 

 

 

 

 

 

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2 hours ago, 8ball said:

If you are about to buy a house don't give your loan officer a heart attack by going out and buying a new car. 

^^^^^

This.

 

There was one time I was in the middle of a refi, which got worse terms because my wife bought a cheap kitchen table.  Only a few hundred dollars, with no interest because we opened up a new card at the place.

 

Don't do anything that increases your monthly payments by even a penny.  If you can refi your current car with a lower monthly payment, that will help you financially and MIGHT help you in getting a home loan.  

 

If you really, really, really want a new car, get one AFTER you have your home.  Then, get the lowest interest you possibly can.  For example, my son got a very low interest loan on his car, because he had okay credit, and was willing to get a 36 month loan.  His car payments are killing him for 3 years, but he will never have negative equity, never pay a lot in interest, and after 3 years will own a car free and clear.  

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23 minutes ago, BrokeBob said:

There was one time I was in the middle of a refi, which got worse terms because my wife bought a cheap kitchen table.  Only a few hundred dollars, with no interest because we opened up a new card at the place.

 

Grounds for divorce in my book.

 

OP - agree with the others.  You need to prioritize.  Buying a house will be a full rectal on your finances.  Don't do anything that will give a LO pause, especially because you want ventilated seats (which don't work all that well anyway).  Once you have bought the house, then fix the car situation.

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Posted (edited)

I'm going to disagree with the herd.

 

Proximity to a mortgage is a red herring unless your new payment will be higher, and then the main consideration is DTI, which won't be an issue unless your payment goes up AND you are already close to maxing out the ratio.

 

DTI only cares about the amount of the payment.

 

If your score is currently borderline for approval or the best terms, that's another matter, because you don't want to risk the potential score impact of a fresh trade line.

 

 

 

Edited by cv91915

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4 hours ago, cv91915 said:

I'm going to disagree with the herd.

 

Proximity to a mortgage is a red herring unless your new payment will be higher, and then the main consideration is DTI, which won't be an issue unless your payment goes up AND you are already close to maxing out the ratio.

 

DTI only cares about the amount of the payment.

 

If your score is currently borderline for approval or the best terms, that's another matter, because you don't want to risk the potential score impact of a fresh trade line.

 

 

 

I don't think you're disagreeing with the herd here. Your last statement clearly applies to OP therefore I (and I would guess others) recommended not doing anything that might jeopardize the mortgage approval.

 

Agree that were we talking about a Tier 1 candidate (FICOs over 780, 20% down, low DTI, etc.) the advice would be different (although likely unneeded as they wouldn't have a car loan at 28%...)

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30 minutes ago, CTSoxFan said:

I don't think you're disagreeing with the herd here. Your last statement clearly applies to OP therefore I (and I would guess others) recommended not doing anything that might jeopardize the mortgage approval.

 

Agree that were we talking about a Tier 1 candidate (FICOs over 780, 20% down, low DTI, etc.) the advice would be different (although likely unneeded as they wouldn't have a car loan at 28%...)

The rest of the herd was more concerned with what the guy selling the mortgage was going to think.

 

7 hours ago, 8ball said:

don't give your loan officer a heart attack by going out and buying a new car

 

5 hours ago, BrokeBob said:

^^^^^

This.

5 hours ago, CTSoxFan said:

Don't do anything that will give a LO pause

The blanket statements that resemble "no new credit before a mortgage" lack sufficient context.

 

OP needs to know his mortgage scores and minimum score requirements for the mortgage program prior to making a decision. 

 

If his 700 is a mortgage score and he needs a 700 for the best terms, easy answer.  Wait. 

 

If a 700 is no better than a 660 for qualification and loan pricing, that's an entirely different matter.

 

Point is, OP needs more info to make an informed decision.

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Posted (edited)

Thanks everyone for the feedback.  Thanks for the feedback that credit has tightened.  I foresee that things will get more challenging with Corona and its effects in the second wave. Hence, the urgency to see what's going on and make the best move for me. The new car note estimates are only $100 more per month. but the FAR lower interest rate (8-12%) is what I saw with Capital One.  

 

Few updates:   1. I got preapproved for up to $35k with Capital One.  2. I'm also aware of the possibility of refinancing for the lower interest rate.  July 1st is 5 years after BK7 discharge date.  3. I am more keenly aware that at 98k miles, I only have 2k more miles for hybrid system warranty too.

 

NACA does not use a credit score for the mortgage.

Edited by dredee0

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Posted (edited)

Hey everyone. Just a quick update.  I had three approvals to work with for a 2017 Lincoln MKZ Reserve.  The first, Capital One, wanted $11k down, although I only had $6717/7717 in negative equity.   The second, American Acceptance Credit & the old lienholder, wanted $1774 down, then $813/month due to 24.10% interest.  You know I told them no.

 

Well, the third approval came from MarvBear's advice.  Thanks for the years of saying if the situation is NOT cut and dry, let the F&I guy do his thing.  THING he DID!! I went for a brand new Lincoln MKZ Hybrid Reserve II.  $35k was asking price vs $50k msrp.  Had I been financed with Ford/Lincoln, I would have received an EXTRA $1000.  So, Ally Financial financed me with $1500 down.  $668 is the car note.  6.89% interest.  In THIS case, buying new was better than used.  It only had 26k miles, but even new, this was the best deal.  Plus, I have a lifetime powertrain warranty.  Yes, I purchased GAP for $1433.  I rolled it into the loan for $22/month.

 

My credit unions turned me down, even after the manual consideration. One credit union counted my student loans against me, even though Covid has forced ALL student loans into deferment.  I even have documentation about the old and new payment. OH WELL!!

 

Odd part is EQ 711 EX 667 TU 667 from what I've seen. I'll get an official MyFICO later.  Couldnt get rid or sockdrawer any cards yet.  I will wait until after the house.  Overall, the $493 old car note with $690 new car note amounts to about 4% increased DTI.  I believe I am now at 32% with rent and car note PLUS student loans.

Edited by dredee0

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Thanks MarvBear.  Quick question.  Is GapDirect legit for gap? It says $240 for 36 months of coveage.  I'm budgeting $400 x2 each month so I figure I will be done with gap in 36 months.  That $1433 financed is an additional $1800 almost.

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You can also see if your auto insurance policy offers GAP insurance.  Some do, some don't.  

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Thanks MarvBear.  Quick question.  Is GapDirect legit for gap? It says $240 for 36 months of coveage.  I'm budgeting $400 x2 each month so I figure I will be done with gap in 36 months.  That $1433 financed is an additional $1800 almost.
Is it included and itemized on your MVRISA?

Sent from my SM-P580 using Tapatalk

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Yes it is.  I have until the 30th to cancel it if I can find another option. GapDirect only goes 72 month.  GEICO does not offer gap/loan pay off coverage.  Their rate is almost $80 less than Progressive or any other quote to get it.  That makes the $18 better.  Ally lowered the monthly payment to $684.06 and the rate went down to 6.64.  

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On 7/7/2020 at 1:16 PM, MarvBear said:

Keep it.

Thanks MarvBear.  I didnt see why to get rid of it.  Even if my insurance did the loan/lease pay off, GEICO at 238/month is better than $314 to have the pay off lol.

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