Debt to Income too high

[mrsd2006]

I accidently applied for a credit increase on my Amex card, and it was denied due to my debt to income being too high (which I already knew).  DH is the main bread winner in the family, I do make low low six figures.  I am on both of our mortgages (two houses), which is around $327K  and he makes all mortgage payments. We don't have any credit card debt, it's paid off every month. DH has a car loan in his name only, so really no other debt. No student loans or any other loans in my name that affect me. I am authorized user on DH's Amex cards, which likely figures into available credit. 

I am going to buy a new car this year. I have a quite a bit saved up for it- likely will put down around $20K, but do have enough to pay in full for cash- but do you think this debt to income ratio will requre that DH has to cosign a car loan for me? I have a credt score of 824 (while very good, I thought it was higher than this). I haven't bought a car since 2009, and we only had one mortgage at the time. 

Any thoughts? 

[flygirl]

You make low 6 figures or your household income is low 6 figures?
What are the mortgage payments each month? If your monthly income is say $9500 a month (gross) and your mortgage payments >$3800, you’re probably going to have an issue right there. While your credit score is decent, they are probably not going to let you get much higher with a car payment. Keep in mind, if you are joint on other credit cards that carry a balance, those payments count against you also. If you have 0 income individually, you’ll likely need a co-signer.

[orval]

I think it is also how much credit you have available. If you have other credit cards that have high limits (even though you pay them off), that factors into it as well. We bought a car last year (both of us on loan) and at least one was denied due to my debt/income. We had no loans of any kind at the time and also pay off credit cards every month. 

[mrsd2006]

Jan 4, 2023 13:00:44 GMT -5 flygirl said:

You make low 6 figures or your household income is low 6 figures?
What are the mortgage payments each month? If your monthly income is say $9500 a month (gross) and your mortgage payments >$3800, you’re probably going to have an issue right there. While your credit score is decent, they are probably not going to let you get much higher with a car payment. Keep in mind, if you are joint on other credit cards that carry a balance, those payments count against you also. If you have 0 income individually, you’ll likely need a co-signer.

My income alone is low six figures. DH is 3x that. Mortgage payments are around $1500 each. We don't carry any credit card balances. 

[mrsd2006]

Jan 4, 2023 13:05:58 GMT -5 orval said:

I think it is also how much credit you have available. If you have other credit cards that have high limits (even though you pay them off), that factors into it as well. We bought a car last year (both of us on loan) and at least one was denied due to my debt/income. We had no loans of any kind at the time and also pay off credit cards every month. 

The credit cards limits are probably around $40K between 3 cards (3 Amex). Not sure if that is considered high or not. We usually carry $3-4K per month between the two of us and they are paid in full every month. 

[wildrice]

It sounds like your debt to income is actually not high at all - though I guess if they are figuring you have 3k in mortgage payments plus 3-4k in credit cards each month and they aren't considering your H's income, your income alone probably can't sustain that. Is there a reason why you wouldn't apply for the car loan jointly since the other stuff is joint? IIRC if you're married it's not really a cosigner so much as a joint purchase.

[goldengirlz]

H and I have separate finances but all our assets are in both our names.

Here’s a cautionary tale, FWIW: when my dad died, only his name was on his car. God knows why. Even though my mom was the sole beneficiary of the estate, it was so much more annoying for her to go through the process of getting the title signed over to her, then if he had just put her on the damn paperwork.

But anyway, yes, if the debt is in both your names, then you need to provide both your incomes. That said, doesn’t all the income count as “your” income anyway, legally? I always list our total HHI when I apply for credit cards, even though I only make half. That’s how the question is worded anyway.

[flygirl]

I think it’s like the other poster said then-there is probably some factor considered for the amount of available credit you have. I know a little over a year ago I received a letter from my bank that they were closing my credit line. I called and asked and they kept it open but the agent said that they were closing a lot of those accounts because so many people were maxing them and not paying (they lost their jobs or had to quit due to Covid). I

[mrsd2006]

wildrice, we do have separate finances otherwise. A car has been considered an individual purchase, but as goldengirlz mentions below, it's not a bad idea to go ahead and put both names on it.

goldengirlz, that is a great point. We should have each other's names on all assets. I need to make it a priority this year to get each other added to checking accounts that are still in individual names.

[dr.girlfriend]

I feel like there's probably more backstory here and totally fine if you don't want to answer, but for the two houses ... is one a vacation home, or rental property? You say you're on both mortgages, but are you on both deeds?

When my husband and I bought our house, we did the mortgage based on my name/income only because he had no credit, but he was still on the deed and we consider it a joint asset.

It sounds like your available credit to debt is kind of high because it's counting your income alone against both mortgages and all the available credit on both your and DH's credit cards, but your utilization sounds low unless you have super huge credit card bills that are being paid off every month, so I'm still a little confused about why this is impacting your credit score, but I'll also admit I don't keep up on the ins and outs of credit ratings.

Also, I hope this doesn't sound judgy, but with household income >$400k why don't you just buy the cars with cash? Unless there's some giant expenses you're not mentioning I don't see where the money is going. Unless it's just a "I can make more money in the market than interest on a car loan" kind of situation, but if you're being denied loans that seems like enough of a hassle to be worth just bypassing.

[mrsd2006]

Jan 5, 2023 14:29:20 GMT -5 dr.girlfriend said:

I feel like there's probably more backstory here and totally fine if you don't want to answer, but for the two houses ... is one a vacation home, or rental property? You say you're on both mortgages, but are you on both deeds?

When my husband and I bought our house, we did the mortgage based on my name/income only because he had no credit, but he was still on the deed and we consider it a joint asset.

It sounds like your available credit to debt is kind of high because it's counting your income alone against both mortgages and all the available credit on both your and DH's credit cards, but your utilization sounds low unless you have super huge credit card bills that are being paid off every month, so I'm still a little confused about why this is impacting your credit score, but I'll also admit I don't keep up on the ins and outs of credit ratings.

Also, I hope this doesn't sound judgy, but with household income >$400k why don't you just buy the cars with cash? Unless there's some giant expenses you're not mentioning I don't see where the money is going. Unless it's just a "I can make more money in the market than interest on a car loan" kind of situation, but if you're being denied loans that seems like enough of a hassle to be worth just bypassing.

These are good questions. I would have to check the deeds.  My name does show when I look at the tax records from the county online, not sure if that is related to the deed or not.  I wasn't on the loan originally when the main residence was purchased, as we were not married or engaged at the time. So I am not sure if the deed was updated at some point.  And yes, one is a vacation home that is not rented out. 

I don't think the available credit is affecting my score, as it's pretty high. But I am just trying to figure out how it would impact me for a car loan. I mean, I want to be independant and be able to get a car loan in my name only but after the denial from Amex, I am not sure I am going to be able to. 

And yes, I do have the  money to buy a car outright but it's just a matter of what's the best use of the money at the time when I purchase it. 

[wildrice]

Jan 5, 2023 15:32:31 GMT -5 mrsd2006 said:

Jan 5, 2023 14:29:20 GMT -5 dr.girlfriend said:

I feel like there's probably more backstory here and totally fine if you don't want to answer, but for the two houses ... is one a vacation home, or rental property? You say you're on both mortgages, but are you on both deeds?

When my husband and I bought our house, we did the mortgage based on my name/income only because he had no credit, but he was still on the deed and we consider it a joint asset.

It sounds like your available credit to debt is kind of high because it's counting your income alone against both mortgages and all the available credit on both your and DH's credit cards, but your utilization sounds low unless you have super huge credit card bills that are being paid off every month, so I'm still a little confused about why this is impacting your credit score, but I'll also admit I don't keep up on the ins and outs of credit ratings.

Also, I hope this doesn't sound judgy, but with household income >$400k why don't you just buy the cars with cash? Unless there's some giant expenses you're not mentioning I don't see where the money is going. Unless it's just a "I can make more money in the market than interest on a car loan" kind of situation, but if you're being denied loans that seems like enough of a hassle to be worth just bypassing.

These are good questions. I would have to check the deeds.  My name does show when I look at the tax records from the county online, not sure if that is related to the deed or not.  I wasn't on the loan originally when the main residence was purchased, as we were not married or engaged at the time. So I am not sure if the deed was updated at some point.  And yes, one is a vacation home that is not rented out. 

I don't think the available credit is affecting my score, as it's pretty high. But I am just trying to figure out how it would impact me for a car loan. I mean, I want to be independant and be able to get a car loan in my name only but after the denial from Amex, I am not sure I am going to be able to. 

And yes, I do have the  money to buy a car outright but it's just a matter of what's the best use of the money at the time when I purchase it. 

FWIW, I don't think it says anything about your independence one way or another if you and your spouse take out a joint car loan. I know everyone is different when it comes to financial stuff, but IMO part of the benefit of having 2 incomes in one household is that have more purchasing power. Anytime I've gotten a car loan in my life I've been the higher earner (though making way less than six figures - you do not have a low income at all!) and it has never crossed my mind that my H was "dependent" on me for the purchase- it was a purchase we were making together with our household funds. 

That being said, you might be fine anyway. If the primary home isn't in your name, the mortgage payment won't be considered for the purposes of your credit worthiness. And although I said upthread something about a 3-4k a month credit card payment, they actually will only count your monthly obligation toward that credit card, which is probably only like $50 or so for a minimum payment. So I can't really imagine that with a 100k+ income you'd be denied for a car loan when you have only like $1600 a month in debt payments tied to your name. If that was the case, single earner households would never be approved for anything since that's a very low monthly obligation for most American households.

[chilerellanos]

Jan 5, 2023 16:12:31 GMT -5 wildrice said:

Jan 5, 2023 15:32:31 GMT -5 mrsd2006 said:

These are good questions. I would have to check the deeds.  My name does show when I look at the tax records from the county online, not sure if that is related to the deed or not.  I wasn't on the loan originally when the main residence was purchased, as we were not married or engaged at the time. So I am not sure if the deed was updated at some point.  And yes, one is a vacation home that is not rented out. 

I don't think the available credit is affecting my score, as it's pretty high. But I am just trying to figure out how it would impact me for a car loan. I mean, I want to be independant and be able to get a car loan in my name only but after the denial from Amex, I am not sure I am going to be able to. 

And yes, I do have the  money to buy a car outright but it's just a matter of what's the best use of the money at the time when I purchase it. 

FWIW, I don't think it says anything about your independence one way or another if you and your spouse take out a joint car loan. I know everyone is different when it comes to financial stuff, but IMO part of the benefit of having 2 incomes in one household is that have more purchasing power. Anytime I've gotten a car loan in my life I've been the higher earner (though making way less than six figures - you do not have a low income at all!) and it has never crossed my mind that my H was "dependent" on me for the purchase- it was a purchase we were making together with our household funds. 

That being said, you might be fine anyway. If the primary home isn't in your name, the mortgage payment won't be considered for the purposes of your credit worthiness. And although I said upthread something about a 3-4k a month credit card payment, they actually will only count your monthly obligation toward that credit card, which is probably only like $50 or so for a minimum payment. So I can't really imagine that with a 100k+ income you'd be denied for a car loan when you have only like $1600 a month in debt payments tied to your name. If that was the case, single earner households would never be approved for anything since that's a very low monthly obligation for most American households.

I’m a single mom and my take home is just under 100k.
My rent is $1400. My credit score isn’t as high as yours, but still good.

And I got approved for a new car loan at a favorable rate in September.

I do carry some CC debt. Usually pay if off but not always, and my household income is far less than yours with a lower credit score.

[sadlebred]

Keep in mind that depending on the state you are in, you and your H may "keep separate finances," but the state considers all you make together during a marriage community property/money. It wouldn't be the end of the world to have him have to cosign for the loan. Having said that, there are a lot of people with worse credit that make a LOT less than you that are approved for car loans. The lending bar for a car loan is no where near as high as it is for a mortgage.

[livinitup]

I would not anticipate having any trouble getting a car loan with your payment history and credit score. A car loan is a secured loan which is different from an unsecured loan - a credit card, especially an AmEx card.

You would probably qualify for a very low rate, too. See which lenders can do a “soft” pull on your credit and give you the best rate - credit union, bank, even the dealership.

[awkwardpenguin]

Debt to income is the minimum monthly payments on your debt divided by your monthly gross income. If that ratio gets too high it can be hard to qualify for new credit. The exact ratio used depends on the type of credit, and often isn't transparent.

I'd guess you can get pre-qualified for a car loan with a soft pull though, they are fairly easy to get.