Lower Debt (no interest) or Bigger Down Payment (loans, interest rate, credit card)
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In short, I recently racked up about $15k worth of debt on credit cards with 0% interest for 1-2 years. I'm interested in buying a house before prices go up, and currently have about $30k that I could put towards a down payment and closing costs. The homes I'm interested in cost around $220k - $300k. I make $100k / year, with a 780 FICO and no debt beyond those cards and a $180 / month student loan.
Am I better paying off those cards now and having substantially less for a down payment, or keeping more for the down payment and paying them off over time / closer to when the 0% rate runs up?
IMO (predicated on meeting qualifying guidelines) -
Go 5% down Conventional, now, and pay other debt down as you can. The "better off" part is subjective. Nobody can predict the future. People might throw around platitudes about having zero debt and then buying a house. I disagree. Pull the trigger.
Personally I would not purchase a home or vehicle unless I was debt free and can pay cash for said home or vehicle.
That being said since you have chosen to finance then I would pay all the debt off before taking a mortgage.
Personally I would not purchase a home or vehicle unless I was debt free and can pay cash for said home or vehicle.
That being said since you have chosen to finance then I would pay all the debt off before taking a mortgage.
^^^^^^
What Pfhtex said.
Though I will add that I wouldn't have racked up credit card debt like thst regardless of the interest rate!
Set aside some money for repairs and other incidentals - there will be some. Then buy the house. Pay off the credit cards asap and do not buy anything else until those are paid in full. Then use the credit cards for convenience only when you already have the money in hand. That will stop you from impulse buying or buying more than you can afford.
Just FYI:
*I am not a free / high spender
*I don't like debt and almost never carry any, except for my student loans which are at about 3% interest
*Until recently I have paid off my credit cards in their entirety every month
*My cars are entirely paid off
*I don't like debt - this whole thing is difficult for me mentally - but I do understand that it can be a very useful tool, especially for large purchases, such as houses, or when you can get it at very low interest rates, especially if it's below what you can reasonably make in the market. That is essentially free money
Why do I have that much on those cards right now?
In January, my girlfriend and I made a 900 mile move. We didn't bring any furniture with us (neither of us had much, I sold what little I had to my brother). We're renting a 2/2 home that needed to be furnished. She had no money and was starting school when we got here. That left 2 bedrooms, a living room, dining room, kitchen, Florida room, and patio that all needed to be furnished and supplied at one time and paid for by me. Yes, I could have paid cash for all of it, just like I could pay off all the debt right now. But why do so when I can get 0% rates, leaving me with more money to invest or use in case of emergency? Plus I knew that if we liked the area I'd be interested in buying a house, so why limit myself if the money could be better spent on a down payment?
In short, I recently racked up about $15k worth of debt on credit cards with 0% interest for 1-2 years. I'm interested in buying a house before prices go up, and currently have about $30k that I could put towards a down payment and closing costs. The homes I'm interested in cost around $220k - $300k. I make $100k / year, with a 780 FICO and no debt beyond those cards and a $180 / month student loan.
Am I better paying off those cards now and having substantially less for a down payment, or keeping more for the down payment and paying them off over time / closer to when the 0% rate runs up?
Well you're not drowning in debt at 15k owed. If you got the money and can get a comfortable payment and are not planning on selling or flipping then buy. Just don't go nuts and get caught and overbid. Good luck.
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