 Dear
Dr. Don,
We are looking into buying a new(er) car, but will need to finance a portion of the purchase. However, we are in a 5/1 fixed-rate ARM, with the term coming up in the summer of 2010.
I am wondering if taking out a
car loan will affect our ability to refinance
and get a good rate before our term is up. We
have no credit card debt.
-- Dan DeVille
 Dear
Dan,
Your ability to qualify for the refinancing will
depend on your credit history, credit score and
employment and income information. If you've got
good credit and good income levels, it shouldn't
be an issue. If you don't know your credit score,
pay to get it from at least one of the three national
credit reporting agencies. Bankrate provides the
contact
information for these agencies. Alternately,
Bankrate has partnered with myFICO to provide
you with a free estimate of your credit score
using the FICO
Score Estimator.
That said, you don't want to have the two loan applications too close together. You want the mortgage lender to see a
few months of payment history on the car loan prior to the mortgage lender making a decision on the refinancing.
The typical homeowner has a car payment. Your having one won't put the brakes on qualifying to refinance
your mortgage. Use Bankrate's "How much home can you afford?"
calculator to see if the car loan combined with the mortgage refinancing puts your loan underwriting ratios at a
point where the lender isn't comfortable. Use your estimate of the equity in your home as the "down payment"
when using this calculator.
You're only halfway into the fixed term on your 5/1 ARM. You've got a lot of flexibility as to when you can refinance. Keep your finger on the pulse of the mortgage market by reading Bankrate's weekly Mortgage rate analysis
and the weekly mortgage Rate Trend Index. Both features come out every
Thursday and you can have them sent to you as a weekly e-mail.
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