Should I keep my new car, or sell it to buy my first house?

I have a new car that was upside down the day I bought it. This loan gives me an unacceptable debt to income ratio for buying a house. Now is pretty much the best time ever to buy a house. Should I get rid of the new car, get a used one, and buy a house, should I keep the new car, stay living with mom, try to pay off debt and stock pile money?

I commute one hour to work when I am not staying with my girlfriend, at least three days a week. If I buy a house it will be close to work, I could even ride my bike! I adore riding my bike as well!

Considering my car note of $430, insurance of nearly $165, gasoline, and minimum maintenance, removing these costs would certainly free up money for at least a house, but likely for savings as well. I would not want a house note for much more than that anyway.

On the other hand, I could not just get up and go whereever I want without a taxi, or a friend, etc. One alternative would be a very, very inexpensive car as a back up only (until I could afford a better car).

I would love to hear your thoughts!

Thank you!