When a mortgage lender analyzes your finances to qualify you for a mortgage, they’re looking at all of your debt along with the new proposed mortgage payment. The other debts that they consider outside of your new mortgage payment are debts like minimum credit card payments, car loans, student loans, and any losses from other rental property. They do not look at debts like utility bill payments, car insurance or cell phone bills.
A mortgage lender will approve your loan allowing you to spend a certain percentage of your gross monthly income on your new mortgage payment and your debts.
Let’s see how much more mortgage you could qualify for if you did not have a car loan. Then you can see if paying off a car loan off leaves you with the cash needed to make a down payment and pay the closing costs to purchase a new property.