Pay down credit cards or save for a house?

Question

Now that the market is out of whack, I am guessing that lenders are going to make touger requirements for giving mortgages. I want to buy a house in 6-8 months. Right now I have about $2000 a month to either save for a house or pay credit cards. My debts including school loans are at $15,000 so it should be paid off after 8 months or so. My monthly minimum payments for these debts are $150.
Many of the house mortgages want a down payment rather than 100% financing. 5% down payment of the place we would want is $17,500.
So is it pay down debt or save for the house?

By the way, the lenders I have been talking to don't look at my entire debt. They consider my monthly minimum payments when computing ratios.

Eddie J- If you can't read, maybe you shouldn't post here. To clear the confusion, I pay $2000 a month on credit cards. In 8 months, I will be paid off. If I save for a house instead, I will be paying the $150 MINIMUM payments for my debts.

Answer 1

If you pay down some of your debt ypu will get a better interest rate.

Answer 2

Any lender who claims they do Not look at your entire debt ,
Just the monthly minimums is likely a left over con artist from the mortgage frauds that have been running .

No reputable lender would let that idiocy fall out of their lips .
Revolving debt incurs HIGH % and you end up paying little on the principals when you pay minimums .
Also , paying with less than 20% down means paying mortgage insurance in addition to the PITI payment .
Lenders still doing the no downs / low downs are probably getting a cut of the PMI racket .

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Answer 3

General financial planning principles would say to pay off the credit card debt before saving for the home. You don't want to pay the high interest rates on the credit card.

But it is unclear from your question if the debt you have is student loan or credit card debt. Just pay the student loan down over time with a normal payment plan. If there is no other debt, save for the house. If there is credit card debt, pay that off before saving for the house.

Don't listen to what others say about this being a good time to buy. I am an expert on this topic, and I assure you that real estate prices will drop in many places by up to 30% in the next months / years before flattening out. Now how much it goes down depends on where you are located. If you live in an already depressed area, perhaps the prices won't drop much further - these areas are Non-coastal California, Michigan, Ohio, Pennsylvania, Kentucky, Las Vegas, Florida and parts of Arizona. Not knowing where you are is hard to say what the declines will be... but if the prices went up a lot in recent years, expect they'll come down. If there were a lot of subprime loans made in your area in recent years, expect the prices to come down a lot. If there was a lot of building of new homes in recent years in your area, expect the values to come down.

So my point is, save more and don't rush into a house. If you are not in one now, you have a rare opportunity to wait for the market to come to you. Wait, wait, wait.

So don't speed up payments on student loan.
Pay off credit card debt before saving for home down payment.
Then aggressively save for downpayment, but don't be in a rush as the market is going down big time, bro.

Peace out.

Answer 4

It's your call but I would suggest you pay off or nearly off the credit card debt. It will provide you an opportunity for a better interest rate with debt that is less then 6 months to pay off. And believe me, lenders take into account your whole financial picture, don't mistake that. And if someone told you differently, I would move on to the next lender.

Answer 5

I would say pay off the debt and save a little as well. It is better to have a low income to debt ratio that way you might be able to get 100% financing. We just qualified for a home loan with no money down. It still is possible. Good luck.

Answer 6

My GUESS is save for the house. It's a good time to buy, and if you buy well, it won't be long before you have positive equity in your house. Maybe you could use some of that equity to pay off your credit card debt--and I believe that home equity loan may be deductible.

The best money I ever, ever spent was going to an independent financial advisor.(NOT SOMEONE WHO EARNS COMMISSION--NO!) Get someone who charges by the hour. The hour cost me $120, and the guy save me $20K immediately. An independent financial advisor will stand by his/her advice and know the laws in your state, and can look at your whole financial picture. (Although yahoo answers is great, in this case you should get a professional!)

Answer 7

I just talked to a financial advisor about this very thing.... definitely pay down credit cards FIRST. They made sense when they told me, why accru all that interest and adopt another high payment on something? Remember we have to live within our means or we will constantly be climbing out of debt.
Hang in there... we can both make it if we play smart not hard.

Answer 8

greater proper double-examine that mastercard fee -- it interior of reason much less costly. customarily, it is greater proper to pay off mastercard debt; no longer basically will you keep a pile of money on activity (mastercard costs tend to be 15% or greater), besides the undeniable fact that it will strengthen your credit status as nicely. for this reason, in the journey that your mastercard costs are rather basically 8%, you should take care of to pay for to hold a number of that debt in prefer of establishing up a pot for a down fee. go communicate to your banker approximately all this; money administration is what they gets a commission to do, and while it is composed of borrowing money for a house, having somebody to neighbor with may well be very efficient.

Answer 9

that's a tuffy, because by you paying your credit cards you boost up your credit and you have more possibilites on being approved for a home loan but with a good down payment even people with bad credit can get a home loan. So, after analizing my own advice I would say have a good down payment instead. good luck.

Answer 10

There is no way you are going to pay off 15,000 in 8 mnths by paying 150.00 a month. If can't do math , you don't need to buy a house.