We are considering relocating and i'm unsure what my best bet is. We will make approx. $15,000 from home sale. We have about $ 20,000 outstanding debt. Is it better from a loan standpoint to take the money and pay down the debt or put as down payment on new house? Our credit scores are average to good but i'm scared our debt may be a negative factor towards us acquiring a new mortgage with a fair interest rate. I've never sold a house before and have only owned this 1 so i'm not sure how to plan this!
2007-03-01 04:24:27 · 7 answers · asked by gljwitte@sbcglobal.net 1 in Business & Finance ➔ Renting & Real Estate
I better get this right. I am a Realtor®
There are a number of unknown variables here.
1. Is the $20,000 debt long term? (more than 6 months)
2. Do you have additional monies available for a down payment?
3. Credit scores (FICO's) should be at least 630 or better depending on your payment history, and income.
4. Can you manage your outstanding debt plus the new mortgage?
Option 1
Based on your question alone, I would suggest consulting a Bank, or Mortgage Broker for pre-qualification. If qualified for "X" amount, WITH the debt, then I'd say use the $15,000 as a down payment.
And pay down the highest interest debts first.
Option 2
If the debt is high interest, then pay down the highest debt 1st. Get the total debt cut in half. Again, consult a lender or Mortgage Broker.
Option 3
See if you can qualify for a loan which covers your existing debt plus mortgage.
Debt is not always a "scary" factor when applying for a home loan.
You need to consult a Lender directly, or a Mortgage Broker.
Also, if applicable, consider FHA, VA, or a 5/1 loan.
A 5/1 is a 5 year fixed payment adjusting beginning in the 6th year.
The beauty of this type loan is prior to the adjustment period, you can refinance again. Usually carries a lower rate than a 30 year Conventional.
Best Wishes..............
2007-03-01 04:54:17 · answer #1 · answered by Bob 3 · 0⤊ 0⤋
My suggestion to you is take $10,000 and apply to your outstanding debt. Take $5,000 and apply that to a down payment on a new house and when you apply for the loan for the house ask to get an extra $5,000 to pay off the rest of the debt that you owe. This way you can be debt fee and have a house. The interest rate is much cheaper then your cc are. And try and stay away from credit cards, everyone needs them but don't abuse them try to pay them off every month.
2007-03-01 04:34:23 · answer #2 · answered by nthernlites40 4 · 1⤊ 0⤋
It depends. What sort of price range are you looking at? If you're moving somehwere cheap, with houses in the $90,000 range, $15K would give you almost 20% down, which would make your loan a shoo-in.
If you're buying a $400K house, 15K down is almost nothing (3%). Also if your income is not a lot compared to debt, the bank will limit how much they approve you for becuase they only allow a certain percentange of your income for ALL debts. (usually no more than 45% of your monthly gross can go to satisfy debts.)
Go to the bank now and get preapproved based on a zero down loan. See how much you qualify for. If its not enough, use the money to pay down debts. If you have a car note with $5K on it and it costs $250 a month, paying that off could up your preapproval as much as $50,0000.
Or the bank might say they need you to use the money down.
It's the EDUCATED way to make your choice. :-)
2007-03-01 04:34:04 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Debt is debt, whether it is on a home or credit cards...only the interest rate is different.
You may have to have a downpayment to buy a house, so find out before you pay off the other debt.
As long as you are adressing your other debt, your "score" won't be affected
Total debt of any form will be included in calculation of how much debt you can afford This means Total Mortgage + other debt, so paying off other debt won't help
2007-03-01 04:31:32 · answer #4 · answered by bob shark 7 · 0⤊ 0⤋
Pay off as much of your outstanding debt as you are able. You will get a better rate on your new mortgage. Don't forget to allow for all your expenses for finalizing everything at your old location, for the move itself, for a down payment on your new house, and for setting up a new home.
Good luck with your move.
2007-03-01 04:30:57 · answer #5 · answered by Alex 5 · 0⤊ 0⤋
LMFAO, no that may not typical. My God. Please tell me you probably did not purchase a million vehicle for 28k, please tell me that's atleast 2 vehicles. 28k!? surely, that's a foul undesirable undertaking. i'm 24, debt loose and am interior the approach of procuring for a house. 10k emergency fund and 8k in retirement account. Do you somewhat have a retirement account? So happy i'm not on your place. maximum of my acquaintances are around the comparable boat, even the few that are nevertheless in college don;t have debt like that. maximum of my acquaintances are employed finished-time, residing on their own, have 401ks, etc. Being youthful isn't an excuse. style one suggestion may well be to maintain your legs closed, please until you alter into extra to blame. next, I additionally do not think of this may well be the main appropriate time to take out much extra loans for college. exceptionally for early babies preparation. Payoff does not be super. in case you have been examining engineering or something of that nature, than possibly i can work out it. end payoff would be addional tens of hundreds of extra debt whilst purely making 20k-30k a three hundred and sixty 5 days tops interior the tip! you're able to hold off on that, artwork finished-time, start up an in abode day care even, something, to earn extra and pay off the debt, you're in excess of your head here. seek for a consultant. 50k debt on your 20s isn't typical interior the least, whilst it would not incorporate a loan or a scientific or dental degree.....
2016-10-17 00:41:51 · answer #6 · answered by ? 4 · 0⤊ 0⤋
Usually you need a down payment when you are not a first time home buyer. Also your large debt will lower the amount you will qualify for.
2007-03-01 04:28:54 · answer #7 · answered by Primdiva 3 · 0⤊ 0⤋