Debt Ratio calculations ? car or house option , i want both ?
credit score 655, B rating.
My pay is 2990 gross amount, i live by net amount.
-Student loan 333 a mth. because of 30,000 dollars debt.
-Rent $350 mth.
-Utilities,heat $150 winters mth..
-Cable $30 mth
-Groceries 200 mth.
my honda accord lx ,car valued at 1700 blue book. worth nothing to banker she said.
banker said i could have 15000 car w/ 300 mths paymets for 5yr and a 80000 house at 7% interest, w/ 5% cash back for closing costs ?
How are they calculating this to be true ? TDS calculations explanation.
Is she setting me up to be house poor in the end by saying go for this car and house on 2990 income to date?
Answers:
While there are some decent individuals in the banking / financial world, you should remember that for many of them their primary job is to sell something - more so than truly helping their customers. So even those you can trust have a conflict of interest - and those you can't, well that's just an ugly combination.
Many people are finding out the hard way now that folks in the loan business will max you out if given the chance - in other words, determine the maximum amount of debt you can take on and allow you to do so without analyzing your buying or spending habits and whether that amount is truly the best move for you. Now many of these individuals are losing their homes because what they could afford on paper (according to the bank or loan specialist) was not what they could handle in reality.
So, before talking to such a person, you should decide what it is you really want and stick to your guns rather than allowing them to talk you into something.
The answer to your first question is they are just looking at the asset itself, not the 'incidental' costs (such as insurance and maintenance) that go along with asset. This is a very common practice and you won't likely hear any financial professional talk to you about those costs unless it is a personal financial planner who you are paying to help you manage your financials from an overall perspective. You are wise to realize that there are additional items to consider than just what the bank will allow you to borrow.
Specific to your situation, in almost all cases a home is a better investment than a car - so if your Honda Accord is still serving you well, I would keep it a while longer and only take on one major debt at a time instead of two. The reason I recommend the home is that generally homes appreciate in value while cars depreciate. So if you were to buy both today, a few years from now conventional wisdom says the home would be worth more than you paid (barring a real estate slump in your area) and the car worth less. In fact, you may be familiar with the common saying that a car is worth less than you paid as soon as you drive it off the dealers lot.
On top of all this, your last question seems to indicate that you already have misgivings about buying the car at a time when it would limit your home options and maybe cause you to settle for a home you won't be happy with - all the more reason to put off the car decision for now and focus on the home.
So bottom line - unless the car is breaking down and you won't have any way to get to work meaning your income would be in jeopardy, home is better investment and should leave you in better financial shape down the road.
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
More Related Questions and Answers...