New car, hard to get conventional loan for first time home?

[Doug Phillips]

Hi all,

My girlfriend and I just got a new car- she makes the payments and we put it in my name due to my pretty good credit (hers is currently pretty bad). My question is: My dad freaked out when we bought it because he doesn't think now I'll be able to buy a home the conventional way until this car loan is paid off. What do you all think? We're currently renting but do want our own house eventually, maybe a house hack or BRRRR I've been reading about? I've never bought a new car (and obviously home) and right now my dad is causing me a great deal of anxiety, love your opinions.

[Jon Holdman]

Well, we don't actually need your payment and income, just the ratio. If the total of all your debt including this car payment is under 8% of your gross monthly income this won't have much effect on your ability to borrow for a primary residence. If its over 8%, yes, that will reduce your ability to qualify for a loan by the amount over 8%. Typically lenders want your total PITI to be under 28% of your gross income, and total debt to be under 36%. But this can depend on your credit score. Have a look at the Fannie Mae Eligibility Matrix for details.  Page 4 shows DTIs and credit score requirements.

Doesn't matter that your girlfriend makes the payments. Your name is on the loan.