I think you'd be better off doing this:
Sell your wife's car. she'll be able to get a good price for a Camry - probably more than she owes.
You two share the remaining car. This is the sacrifice you'll have to make to buy a house.
Pay extra on the Torrent each month - perhaps $200 or $300 extra to knock it down. Plan on driving it till it falls apart.
Lay out your numbers now - set a spending goal for your first house, considering you'll need 20% downpayment and calculate how much you'll need to save each month to reach that goal.
Plan to have total debt (incl mortgage) no more than 41% of your combined monthly gross. Them's the rules now. Consider if you are going to have kids and if your wife will drop out of work then.
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