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First Time Home Buyers Should Wait to Purchase a Luxury Car

Moving into a home that you own can provide an indescribable sense of accomplishment. Although, certain decisions might delay or derail your opportunity to buy a home. Perennial Funding offers home buying tips and affordable mortgage loans in Pennsylvania, Delaware, Florida, Maryland, New Jersey and Virginia.

Wait to Finance a Luxury Car

While you might need a reliable automobile to commute to and from work, it is not a wise idea to obtain an expensive car payment prior to buying a house. According to recent data from the U.S. Census Bureau, the median household income in the United States is $59,039.

Luxury cars are typically priced above $40,000 for new and recent models. Considering a ten percent down payment on a luxury automobile and a five-year loan at five percent, you would have a car payment that amounts to $679.36 per month.

If your household earnings mirror the above-shown information from the U.S. Census Bureau, your gross income averages $4920 per month. Therefore, your automobile payment would take almost 14 percent of your gross monthly income.

This type of debt often prevents first time home buyers from receiving a mortgage loan approval. Many home buyers are not aware that mortgage lenders will use a portion of a borrower’s income for qualifying purposes versus 100 percent of the amount earned.

For instance, conventional lending guidelines will use 28 percent of your gross monthly income to cover your proposed housing costs. When factoring your housing costs and other debts, such as a car payment, credit cards and student loans, the guidelines will allow up to 36 percent of your income for qualifying purposes.

In the above scenario, the luxury car payment would consume nearly a third of the allowable portion of your income-to-debt ratio.

While the qualifying ratios are higher on government-backed loans, such as FHA mortgage loans or VA home loans, financing for a luxury car could still create certain financing challenges for a first time home buyer.


If you have already purchased a luxury car, however, you were denied for a mortgage loan approval, you may have several options to consider. Based on the age, condition, mileage and the amount owed on your vehicle, you might be able to sell or trade the car to reduce your debt.

If you have an above-average finance rate on your car, you can ask your bank whether refinancing the existing loan is an option.

After securing an affordable mortgage loan to buy a home, you may be able to shop for another car.

Perennial Funding employs licensed loan officers who provide honest and friendly customer support. Call us today at (888) 826-4856 to discuss ways to obtain financing to buy a home.

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*By refinancing your existing mortgage your total finance charges may be higher over the life of the loan.

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