I am 35 years old earning $50-60 grand/year. I have $42,000 in my 401k plan. I have $10,000 credit card debt. No money in savings. My credit score is in the mid 600's. I would like to own a home this year. Is it possible? What are some of the first steps I should do?
2007-01-09 00:05:09 · 4 answers · asked by veebeerah 1 in Business & Finance ➔ Personal Finance
There is a way, but with that 10K credit card debt hanging over your head you will definitely face some hardships. For the life of me I do not know why people can not live within their means.
There is a provision in the rules governing 401k plans that will allow you to borrow money from the plan at market interest rates. That means you have to pay it back at prevaling interest rates. There is one catch. If you should leave the company for whatever reason, you are requried to pay back the total loan within 6 months. A serious handicap.
What you should do is borrow the entire amount, pay off the credit card debt and use $25,000 for a down payment and the other $7,000 for expenses associated with the purchase of a new home. But you will have to be able to pay off the loan at the rate of about $5,000 a year. I doubt that you will be able to do that especially with a house payment, taxes, insurance, utilities, and all the other expenses associated home ownership.
2007-01-09 00:35:48 · answer #1 · answered by Anonymous · 0⤊ 0⤋
You could lower the percentage you put into your 401k and dedicate that money to paying off your credit card bills.
Also, get a copy of your credit report and find out why your score is so low and what you can do to increase it.
Find out what sort of deal your lending institution will make you to get a home loan. With having nothing in savings you won't have any money for down payment so you'd need a 100% loan - iffy with your poor credit score. Then you'd still have to come up with closing costs and all the related fees with a home purchase.
You could check into federal loans (i.e. FHA) or state sponsered loans for first-time buyers and see if that will work for you.
You may have to put off your idea of buying a home this year until you have your credit score up and money in the bank.
2007-01-09 01:06:31 · answer #2 · answered by parsonsel 6 · 1⤊ 0⤋
You should check into why your credit score is so low. With only 10k in debt, it should not be that low. Did you miss a lot of payments?
You will still be able to get approval, especially since you have so much in your 401k, however, your rates will be horrible.
2007-01-09 00:26:16 · answer #3 · answered by Strategic Sourcing Expert 4 · 0⤊ 0⤋
Try to pay off your credit card debt first. That will be your biggest enemy.
2007-01-09 00:13:29 · answer #4 · answered by Anonymous · 0⤊ 0⤋