House or Car: What Should You Buy First?

Deciding between buying a house or a car first is one of the decisions a lot of us have to make.

It’s a big move, especially when you are about to spend a lot of your hard-earned money or potentially take out a bridge loan just to afford it.

Moreover, it can impact your monthly payments, debt-to-income ratio, and overall financial situation.

Whether you want a car that can take you to places or a roof over your head that you own, that decision still feels heavy.

This is why we have outlined the pros and cons to determine which major purchase makes the most sense for you.

Can I Buy a Car and a House at the Same Time? What to Do First

Yes, you can—but it’s risky. Taking on two large loans in the same period means opening new credit accounts, which can temporarily lower your credit score and make lenders more cautious.

It’s smarter to space them out by at least a few months to preserve your buying power and avoid credit denials.

• Buy a house first if long-term equity, tax benefits, or financial stability are top priorities.
• Buy a car first if transportation is essential for work, commuting, or daily life.
• Avoid applying for both loans at once unless you have low debt, high credit, and a steady income.
• Time your purchases to keep your debt-to-income ratio favorable and your credit scores stable.
• Postpone big purchases and big ticket items, such as expensive appliances or new gadgets, until after your mortgage closes to avoid negative impacts on your credit and loan approval.

Which Should You Buy First: House or Car?

If you can’t do both, then you can either choose between buying a house or a car first. This all depends on your goals and needs.

Choose the house first if you’re building equity, investing long-term, or qualifying for a mortgage loan.

Purchasing a new house first can help you avoid debt-to-income issues and protect your credit score during the mortgage process.

Choose the car first if transportation is a daily necessity and your current living situation is stable.

However, buying a car before buying a house can reduce your mortgage eligibility due to an increased debt-to-income ratio.

Tip: Consider the market value of a property and your down payment before locking in a car loan that might limit your mortgage approval.

Factors to Consider If You Should Buy a House or a Car First

Buying a house or a car is a big investment in itself. These are some of the factors to think about before buying a house or a car. 

Financial Stability and Goals

Before you jump into buying a house and a car, take a close look at your financial situation.

Start by reviewing your debt-to-income ratio, which compares your total monthly debt payments to your gross monthly income. This number is a key factor that mortgage lenders use to determine if you qualify for a mortgage loan and how much you can afford.

If you’re living paycheck to paycheck or have a fluctuating income, taking on a big loan can be risky if your finances aren’t steady. It’s better to save money and pay down debt first.

Credit Score Implications

Next, check your credit report for any errors or issues that could be dragging down your credit score.

A higher credit score can help you secure better rates and terms on both a mortgage and a auto loan.

Make sure you have enough income to comfortably cover your monthly payments for both a house and a car, without stretching your budget too thin.

By understanding where you stand financially, you’ll be better prepared to make smart decisions about buying a house, a car, or both.

Lifestyle Needs and Priorities

Your lifestyle directly influences whether it’s smarter to buy a house or a car first.

If you live in a city with strong public transit, a car may not be necessary, so homeownership is more practical.

If you live in a suburb or rural area where buses are limited and Uber is expensive, you may need a ride to get to work or run errands.

Watch out for lifestyle inflation, you do not have to spend more just because you are earning more. Choosing a luxury car or a bigger home you don’t really need can lead to overspending and hurt your savings. Avoid impulsive buying and unnecessary expenses based on emotions or pressure.

Also think about your job situation. If you work remotely or a digital nomad a mortgage right now may not be the best idea. Focus on what fits your current lifestyle, not just what looks good on paper.

Investment Potential

A house is usually a better long-term investment. Real estate often grows in value, and it can also bring in rental income or become a future vacation property.

In some cases, it may even work as a tax-deferred investment if you reinvest profits through certain programs.

Cars, on the other hand, lose value quickly. Buying a car, even if it is an electronic one, is more of a short-term investment in mobility and convenience, not in growing your assets.

Depreciation vs. Appreciation

Cars lose value quickly. A new car can drop in value as soon as you drive it off the lot and continues to lose value over time.

In contrast, homes usually gain value over the years. Real estate often appreciates.

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Advantages of Buying a House First

Before deciding between buying a house or a car first, take into considerations the advantages of a house. These will help you understand your priorities and needs.

Building Equity

You gain equity, tax benefits, and long-term value. Making regular payments on your home loan can increase your net worth.

Tax Benefits

Owning a home can save you money on taxes. You may be able to deduct mortgage interest, which lowers your taxable income.

Additionally, you may qualify for home improvement loans or deductions for mortgage interest rates and property taxes.

Stability and Security

Buying a home offers more stability and control than renting. It gives you a stable home, helps you feel part of the community, and adds emotional and financial security especially for families.

Unlike a car, a house lets you make changes that reflect your personal style and needs. Additionally, homeownership can also provide protection during major life changes like divorce or separation.

Legal tools like prenups or different types of trusts can help secure your property.

Hidden Costs of Buying a House

Buying a home isn’t just about the down payment and mortgage. There are several hidden costs that can surprise new buyers.

Property Taxes

Property taxes are paid annually and vary based on your home’s location and market value. Even if your mortgage seems affordable, high local tax rates can significantly increase your total monthly cost.

Make sure to confirm your expected tax amount during the escrow process and budget for annual increases.

Maintenance and Repairs

As a homeowner, you’re responsible for all upkeep—there’s no landlord to call. From minor plumbing issues to major roof repairs, these costs can add up quickly.

According to industry data, the average homeowner spends about $3,192 per year on home maintenance. Moreover, this cost that doesn’t include unexpected repairs or emergencies.

To stay ahead of these expenses, experts recommend setting aside 1–2% of your home’s value each year.

It’s also smart to use a property inspection checklist before buying to spot issues early and avoid surprise costs.

Utilities and Services

Home utility bills are usually higher than in a rental. You’ll likely pay for water, electricity, gas, trash, internet, and even security systems.

Some homes may also come with leasehold obligations or lease fees that add to your monthly expenses.

To save money, look into how to lower bills by using energy-efficient appliances or cutting back on usage.

HOA Fees

If your new home is in a community with a homeowners association (HOA), you’ll likely have monthly or annual fees.

These cover shared services like pool upkeep, landscaping, or community amenities but can be costly and vary widely.

Closing Costs

Closing costs can range from 2% to 5% of your home’s price. This includes fees for the loan application, title insurance, appraisal, legal services, and more.

Consulting with your lender or mortgage broker can help you maximize the benefits of homeownership and ensure you meet all loan requirements.

Homeowners Insurance

Most lenders require homeowners insurance, which protects your property from damage or loss.

Rates vary based on location, home value, and coverage needs, and they add to your monthly costs.

Private Mortgage Insurance (PMI)

If your down payment is under 20%, you may need to pay PMI. This protects the lender but increases your monthly mortgage bill until you build enough equity to cancel it.

PMI is common across various types of real estate ownership, so ask your lender if this applies to your loan.

Other Hidden Housing Costs

You may still need a security deposit if you’re buying in a lease-to-own arrangement or shared ownership model.

A condition report should be part of your final home walkthrough to ensure everything is in expected shape before move-in.

Alternatives to Buying a House

If you can’t buy a home right now, these are your other options:

Renting

Renting is a good option if you want flexibility and lower upfront costs. It’s great for anyone not ready to buy or still deciding between renting vs. buying a house.

You can rent a studio or 1-bed unit, share a place, or go for something bigger.

Surprisingly, renting is also common in historic homes, where owning might not be possible due to special rules.

Subleasing

Subleasing means taking over someone else’s place for a limited time, usually under a primary lease.

It’s a great option if you’re looking for a short-term rent without the hassle of signing a new lease.

Just make sure the original lease allows subleasing and that you have written approval from the landlord.

Subletting

Subletting allows you to rent out your apartment or room to someone else while you remain on the lease. This is helpful if you’re traveling or relocating temporarily.

Subletting is common in flexible living arrangements like co-living spaces, loft apartments, or units in a duplex.

Lease Options

A standard lease typically lasts 6 to 12 months, but some properties offer lease-to-own agreements that help you work toward eventual homeownership.

If you’re not ready for a permanent move, options like Airbnb, timeshare units, or homestead rental programs may be worth exploring depending on your location.

Read More: Renting vs. Buying a House: Make the Smart Choice Now

Is Buying a Car First a Better Idea?

Yes, if transportation is urgent or your job depends on it.

If you need to drive daily or have no public transport, a car might be more important than a house. B

uying a car first could also help you build credit if you’re just starting out.

However, financing a new vehicle can increase your debt-to-income ratio and potentially affect your ability to qualify for a mortgage if not timed carefully.

If possible, pay cash for the car to avoid impacting your mortgage chances.

Advantages of Buying a Car First

Before deciding between buying a house or a car first, consider these key advantages of buying a car first.

Essential for Work and Daily Life

A car provides immediate transportation for commuting, errands, and travel. This is especially valuable in areas with limited public transit or expensive ride-share options.

Having a car can expand your job opportunities beyond your local area, too.

Lower Initial Investment

Buying a car usually requires less upfront cash than purchasing a home. The car loan is also lower compared to a mortgage.

Potential Positive Impact on Credit Score

Financing a car and making consistent on-time payments can help build your credit history and recover your credit score over time.

A strong credit score enhances your chances of qualifying for better mortgage rates later.

However, avoid relying on unsecured loans or carrying high balances, as these can negatively affect your credit.

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Hidden Costs of Buying a Car First

Buying a car involves more than just the sticker price or monthly payment. Here are some common hidden costs you should know about before making a car purchase:

Auto Insurance

Car insurance, a type of personal insurance, is required and can vary widely based on your age, driving history, location, and vehicle type.

Premiums for newer or luxury vehicles are typically higher.

Fuel Costs

Fuel is an ongoing expense that adds up quickly, especially if you drive often or your car isn’t fuel-efficient.

Gas prices can also fluctuate, impacting your monthly budget.

Maintenance and Repairs

Even new cars need routine maintenance like oil changes, tire rotations, and brake checks.

As cars age, repair costs rise especially for old, imported, or high-performance models.

Alternatives to Buying a Car First

If buying a car doesn’t fit your budget or lifestyle right now, here are some common options:

Ride-Sharing Services

Apps like Uber or Lyft offer on-demand rides without needing your own vehicle. They’re ideal for occasional trips, errands, or commuting in urban areas.

Just keep in mind that frequent use can get expensive.

Public Transportation

Buses, trains, and subways are affordable and reliable in many cities.

If you live in an area with a strong public transit system, this can be a cost-effective alternative to owning a car.

Biking or Electric Scooters

For short commutes or errands, biking or using electric scooters is a low-cost, eco-friendly option.

Many cities also have scooter-sharing or bike rental programs.

Car Subscriptions or Rentals

Some companies offer car subscription services that let you drive different vehicles month-to-month with insurance and maintenance included.

For short-term needs, car rentals can also be more affordable than buying.

Carpooling or Rideshare Programs

Carpooling with coworkers or using local rideshare programs helps cut fuel and maintenance costs.

Some employers or cities offer incentives for shared commuting.

Leasing a Car

Leasing lets you drive a new car for a set time (usually 2–3 years) without the full cost of ownership.

Monthly payments are often lower than buying, but you won’t own the vehicle.

Read More: Home Loans: Which One Is Most Beneficial For Me?

Tips for Deciding Whether to Buy a Car or House First

• Calculate your debt-to-income ratio before any major purchase.
• Space out applications by 6–12 months to avoid overlapping debts.
• Build emergency savings to cover both short-term and ongoing costs.
• Ensure you have enough money saved for down payments and other expenses before buying a home or car.
• Manage your money carefully to maintain good credit and meet loan eligibility requirements.
• Consider relationship or living status (e.g., civil union, roommate agreement) to avoid complications in shared financing.
• Talk to a mortgage broker, real estate agent, or financial advisor to create a plan.

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Conclusion

Deciding whether to buy a house or a car first is a big financial step. The right choice depends on your income, goals, and lifestyle.

Think about what you need most right now—transportation or long-term stability—and how each option fits your budget and future plans. Whether you value mobility or want to build equity, make sure your decision supports your overall financial health.

For more practical tips on smart money decisions, follow Financial Daily Update and stay informed on personal finance, home buying, and investing.

Updated on May 30, 2025.