I have about $30,000 in savings and about $21,000 in credit card debt. I have a high credit score, and I plan to buy a house in June. Should I pay off the credit cards? or shoud I keep the entire $30,000 to pay for closing costs and down payment?
2007-03-20 05:28:19 · 10 answers · asked by stjohns6670 1 in Business & Finance ➔ Credit
Pay off the cards... that will influence a lender's decision. Also, to avoid PMI, you can roll the cost (usually around 1%) into the loan to avoid having to pay the $45 per every $100,000 borrowed every month.
Paying down your credit card debt will boost your FICO score because your balance-to-limit ratio will go down, thus boosting what makes up 30% of your score!
Best of luck... and try to save s'more for the down payment... there's far too much foreclosure going on out there and I wouldn't want you (or anyone, for that matter) to be one of them. I'd also suggest you start an emergency ("go to hell") fund to help in case you're out of work or injured or the roof leaks or your car's transmission dies... or about 50 million other reasons that could send you into debt and jeopardize your house.
2007-03-20 05:32:18 · answer #1 · answered by Anonymous · 0⤊ 1⤋
That credit card debt may kill you. The broker you hire to help you find a home will do a pre-qualification to see if your even able to get financed. They will perform a debt ratio calculation to see where you are financially. For example, if you make $90,000 a year, and only have a small car payment and those credit cards, you may just squeek by, but typically your ratio's are about 28% which means that your total debt (payments per month to creditors) cannot exceed 28% of your disposable income. Ratio limits are a little different in different locations, but I believe 28% is about the lowest you'll find. If you fail to meet the ratios you will have to eliminate some of the debt. This is a catch 22 for you as the more you put down the better off you are in the long run. You get lower payments, a possible tweek to your rate and if your down payment is more than 10% of the purchase price, you avoid PMI (Premium Mortgage Insurance) which is just tossing money away at nothing. It all depends on what your buying, and its cost. Those depend on where your buying and whats available in your area. If you are lucky and can buy a nice place in a good area for $175/K and keep $17,500 to put down and pay the rest on your debt, and meet the ratio's your in like Flynn.
2007-03-20 05:41:48 · answer #2 · answered by Sane 6 · 0⤊ 0⤋
I'd pay the credit card debt first, unless all of that is on a 0% interest card. In fact, I'd use half your savings (15k) to pay off most of that debt immediately. Then each paycheck make the biggest payment you can on it. After that start saving for a house, and cancel all your credit cards. In today's market with inflated home prices 30k for a down payment isn't much so you will need to keep saving regardless. With your good credit there is no reason you can't wait for housing prices to keep dropping (which trust me they will) and interest rates will likely stay the same or go down a little before the end of this year. They will begin to tighten who they give loans to and you want to make sure you preserve your good credit. With your credit card debt paid off, start socking all the leftover money into your savings and you will be well on your way to owning a home and that being your only debt.
2007-03-20 05:33:46 · answer #3 · answered by JM 3 · 0⤊ 1⤋
the guideline of thumb is many times to repay debt if the interest cost on that debt is decrease than the interest cost you ought to assume to get carry of by ability of making an investment the money. on account that expenses of interest are very low correct now, i might say it incredibly is in all risk ultimate to pay down the debt with the optimal expenses of interest. although, with the way the financial equipment is now and with you watching for a baby, there's a undeniable top classification linked with having some money attainable. in case you have already got some money saved up for a wet day (approximately 3 - 6 months of living expenditures extremely worth) then i might say to pass forward and pay down debt, otherwise, it may be a greater advantageous thought to save taht earnings case some thing unpredicted happens. desire this permits.
2016-10-01 05:37:44 · answer #4 · answered by ? 4 · 0⤊ 0⤋
I would pay off your debt. You're probably spending a TON of interest on that debt, and on top of it, you don't want to go into a mortgage with debt; if you fall behind, you'll have a lot more bills to worry about!
2007-03-20 10:09:20 · answer #5 · answered by Waiting and Wishing 6 · 0⤊ 0⤋
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2007-03-20 06:53:57 · answer #6 · answered by Anonymous · 0⤊ 1⤋
when u buy a home, ,try not to have any debt and save as much as u can for the down payment.. GOOd LUck
2007-03-20 05:35:30 · answer #7 · answered by shorty21 5 · 0⤊ 1⤋
Your debts will count against your getting a sizable mortgage so pay off as much as you can before applying for a mortgage.
2007-03-20 05:33:33 · answer #8 · answered by Akbar B 6 · 0⤊ 1⤋
Im just your average joe, so.. I would say its better to pay off your debt, since it will lower your Debt to income ratio, and that will definetly help you!
2007-03-20 05:32:54 · answer #9 · answered by Anonymous · 0⤊ 1⤋
keep paying like you are now
if suddenly you have zero balances the credit folks will suspect something is amiss
just keep it going like now
2007-03-20 05:37:13 · answer #10 · answered by Anonymous · 0⤊ 2⤋