Buying with FHA? Your Car Payment May Not Count
If you are buying a home with an FHA loan and your car loan is almost paid off, you may be asking:
“Will my car payment still count when I apply for a mortgage?”
The answer is:
Maybe.
Many buyers are surprised to learn that FHA may allow some car payments to be left out when figuring out if you qualify.
But there are rules.
When FHA May Not Count a Car Payment
FHA may allow certain monthly payments to be left out if:
-The loan has 10 payments or less left at closing
AND
- The payment amount is small compared to your monthly income
This rule usually applies to loans with a set ending date.
Examples:
- Car loans
- Personal loans
- Furniture financing
One important note:
You usually cannot make extra payments just to get under the 10-payments-left rule.
Example
Let’s say:
- Car payment = $500 per month
- Payments left = 8
To see if FHA may allow that payment to be left out:
Take:
$500 ÷ .05 = $10,000
That means the buyer would generally need about:
$10,000 per month in gross income
or about
$120,000 per year
What does that mean?
If income is around $10,000 per month or more, the payment may not need to count.
If income is lower, the payment will usually still count.
Every loan is reviewed individually.
What About Car Leases?
This is where people get caught off guard.
Many buyers think:
“My lease only has a few months left, so it shouldn’t count.”
But that is not usually how it works.
A car lease is often treated differently than a regular car loan.
Even if your lease is ending soon, the payment may still need to be included.
There are some situations where exceptions may apply, but every file is different.
That is why it’s important not to guess.
Why This Matters
One monthly payment can make a difference in:
- How much house you qualify for
- Your monthly payment
- Your loan options
Sometimes buyers qualify easier than they expected.
Other times, a payment they thought would disappear still counts.
That’s why it helps to review everything before starting the home search.
Final Thoughts
If your car loan or lease is almost finished, don’t assume it automatically helps you qualify.
The rules can be different depending on the type of payment and your full financial picture.
Talk with a trusted mortgage professional before making decisions or changing payments.
If you’re thinking about buying in New Jersey, Florida, or Georgia, I’d be happy to help you review your numbers and talk through your options.
Sources & Additional Information
This article is intended for educational purposes only and is not mortgage advice or a commitment to lend. Qualification requirements vary based on the complete loan scenario.
Primary Source:
HUD Single Family Housing Policy Handbook 4000.1
Relevant guidance (Debt-to-Income / Liabilities):
Closed-end installment debt may not be required to be included in qualifying when there are 10 payments or fewer remaining and cumulative payments meet FHA requirements.
Important Note:
Vehicle leases and other obligations may be evaluated differently and may still be required to be included in qualifying calculations.
Program guidelines are subject to change. Always consult with a licensed mortgage professional regarding your specific situation.
Richard L. Bolt
Mortgage Loan Officer
Cornerstone First Mortgage
NMLS #222703
Company NMLS #173855
Cell: 908-332-8575
Schedule a virtual meeting:
https://api.leadconnectorhq.com/widget/bookings/richbolt-20min