Hawaii Real Estate

Honolulu Homes

Don't Buy a Car - or Did You Already Buy One?

* Debt-to-Income Ratios and Car Payments
* How Buying a Car Reduces Your Purchase Price

Debt-to-Income Ratios and Car Payments
DTI, or "debt-to-income" ratio is the percentage of your monthly income that is spent on mortgage payments, home owner's insurance, property taxes, car payments, credit cards, and anything else that shows up on your credit card.

Your DTI doesn't include your utilities, cell phone, or any other living expenses. Basically it's just your housing and your regularly paid debt. Lenders want to see a DTI that is under 45% for most loans, while some B paper loans will go to 55% or higher, and charge you a higher rate.

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How Buying a Car Reduces Your Purchase Price
If you earn $7000 a month and you have a $500 car payment, at 6% interest rates on a 30 year fixed rate loan you would qualify for approximately $48,000 less on the mortgage than if you didn't have that car payment.

Also keep in mind that a car is a depreciating asset. The minute you drive off the lot you lose 10% or more of the car's value, and over 5 years or so the car basically loses most of its value. On the other hand your house will be increasing in value while your car decreases. Are you sure you want to buy that car?

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Buy a Car

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