Buying a house and buying a car can feel urgent at the same time.
Even though J.P. Morgan Global Research projects U.S. home prices to stall at 0% in 2026, it doesn’t mean homeownership and mortgages will be more affordable.
On the auto side, Americans spend $717 billion a year on auto loans and insurance combined, with the median household spending $6,900 annually, according to doxo’s 2025 U.S. Auto Loan Market Size and Household Spending Report and the 2025 U.S. Auto Insurance Market Size and Household Spending Report.
So, house or car: which should you buy first?
Key Factors to Consider
Three things largely determine which purchase you should prioritize.
Your Timeline and Priorities
Urgency and flexibility both factor into this decision. A car purchase moves faster than a home purchase, and your car travels with you wherever you relocate. Buying a house requires considerably more planning.
Your Savings and Down Payment
Homeownership has costs beyond the down payment. You also need cash reserved for closing costs, recurring monthly mortgage payments, and maintenance. If your savings fall short of all three, purchasing a house right now may be premature.
Your Credit Score
Both an auto loan and a mortgage require good credit. A score of at least 620 qualifies you to buy a house, and 600 to buy a car. Higher scores improve your loan terms in both cases.
How Mortgages and Car Loans Affect Credit, DTI, and Terms
The impact of a mortgage and a car loan includes:
Impact on Credit Score
Mortgage lenders pull your credit report and evaluate your credit score during underwriting to see how reliable a borrower you’ll be.
Conventional loans typically have a minimum score requirement of 620, but FHA loans will accept scores as low as 580.
A car loan added to your credit profile also affects amounts owed (30%), payment history (35%), length of credit history (15%), and credit mix (10%).
Impact on Debt-to-Income Ratio (DTI)
Your debt-to-income ratio shows what portion of your gross monthly income is spent on debt payments.
If you make $6,000 per month and have a student loan payment of $700, an auto loan payment of $400, and monthly credit card payments of $250, then your DTI ratio is 22.5%.
Many lenders cap DTI at 36%. Regardless of loan type, a bigger car loan lowers how much mortgage you can qualify for. Affordability is your total monthly debt payments, not just the car payment.
Impact on Loan Terms and Rates
Auto loans are good for 4 to 7 years, and mortgages run from 15 to 30 years. Shorter repayment windows on car loans don’t always mean lower rates.
They also come with higher interest rates than home loans, and the rates you’re given can depend on your credit score, DTI ratio, and loan term.
In mortgages, a single point difference in mortgage rates could mean tens of thousands of dollars over a 30-year loan.
Budgeting for a Car vs. a House
Ownership costs for both a car and a house go far beyond the purchase price.
Setting a Realistic Budget
Popular rules of thumb suggest putting no more than 10% of your monthly income into a car loan and no more than 28% of your monthly income into a mortgage payment.
Staying under both thresholds leaves you room to absorb an unexpected expense or a drop in income.
Monthly Payments and Ongoing Expenses
Financing the purchase of either means factoring in costs outside the loan itself.
Mortgage payments are made up of principal, interest, property taxes, and home insurance. Anticipate spending about 1% of the home’s value each year on maintenance and repair costs.
Car ownership also has its own recurring costs: sales tax, excise tax, insurance premiums, and gas. Routine maintenance runs between $600 and $1,200 annually, too, and increases with aging vehicles.
Pros and Cons of Buying a Car First
| Pros | Cons |
|---|---|
| Have a lower entry cost, particularly when buying second-hand | Opening a new credit account causes a short-term dip in your credit score |
| Provides dependable access to work | Raises your debt-to-income ratio, which mortgage lenders factor in during mortgage approval |
| Making consistent payments on your car builds credit history and raises your score for a mortgage in the future | Buying a house right after a car purchase is unlikely until your finances stabilize |
| It’s easier and cheaper to refinance a car loan when interest rates decrease than it is to do so for a mortgage |
Pros and Cons of Buying a House First
| Pros | Cons |
|---|---|
| Historically appreciates in value, making it a low-risk long-term investment | Requires a substantial down payment and the financial capacity to sustain monthly mortgage payments |
| Eligible for property tax deductions, capital gains exclusion, and other preferential tax treatment | Demands long-term location commitment, ideally five or more years |
| Forms the foundation of wealth creation and opens doors to build wealth in other assets | Repair costs, upkeep, and unexpected maintenance fall entirely on the homeowner |
| Locks in a fixed mortgage payment before home prices or mortgage rates rise further | Requires reliable transportation to work independent of the home purchase |
| Build equity as the property appreciates |
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Frequently Asked Questions
Is it better to have a house or a car?
It depends on your current financial situation, daily needs, and how stable your income is. Neither purchase is the better choice.
Will buying a car impact buying a home?
Yes. Adding an auto loan to your credit report raises your debt-to-income ratio and can lower your credit score, both of which affect mortgage eligibility. It also slows your progress toward saving for a down payment, since more of your monthly budget goes toward car payments.
Is it possible to buy a house and a car at the same time?
Technically, yes, but it’s best to avoid it. Taking on both loans simultaneously strains your DTI ratio and credit score, making it harder to secure favorable terms on either.
The Bottom Line
Start with the purchase that your current financial situation and daily life genuinely require. Both a house and a car contribute to long-term financial stability, but the right order depends on your priorities today.
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