When determining your ability to qualify for a mortgage, a lender looks at what is called your "debt-to-income" ratio. This is the percentage of your gross monthly income (before taxes) that you spend on debt.  

We’ll use round figures to demonstrate:   Say you earn $5,000 a month and you have a car payment of $400.   Using an interest rate of 8.0%, you would qualify for approximately $55,000 less than if you did not have the car payment.

Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours. Do not get discouraged, however. You should still take the time to get pre-qualified for a mortgage loan. You state your desired price and how much you can put down. You provide your income and may even supply pay stubs and W2 forms. The loan officer will methodically crunch the numbers and let you know where you stand.   If you earn enough you may be ready to make an offer on the home of your dreams.   Maybe you’ll need to save more towards a down payment but at least you’ll know what the goal is.

If you have not already bought a car, remember one thing. Whenever the thought of buying a car enters your mind, think ahead. Think about buying a home first. Buying a home is a much more important purchase when considering your future financial well being.

Do not buy the car. Buy the house first.

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