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Hi, I'm about 6 months away from (I hope) finally buying my first house. I'm current on everything and don't know my FICO score, but my Vantage Score is 817. (I thought I was buying a FICO score, grr).
I did have quite a bit of credit card debt but have been paying it down like crazy. I think by the time I apply I'll have around $2000 in credit card debt with limits of over $8500 on two cards (one card has zero balance). This impacts my saving of course. I plan to get an FHA loan because I have to have a low down payment. Don't really want to post my salary but should be able to find something decent in my area for no more than $160K, perhaps less.
I do have a lot of student loan debt, which stinks - focusing more on the credit cards, though am current w/student loans.
Do you think this is the right approach? I originally thought I should pay ALL the credit card balance off, but then realized I can't save enough if I do, and my lease is up at the end of next April. So I'm doing what I can to get my debt to income ratio reasonable. A 20% down payment isn't going to happen and gift funds are not available.
Only having $2000 in cc debt isnt that bad but it is still $2000 to much.
I think you are following a good approach. Others will probably say you should pay everything off first, but i think you should follow your strategy. Rates are low and home values are low, so a great time to be buying.
Do credit card balances have such a large impact on your mortgage qualification? We are starting to look into buying next year and will be in a similar situation, except with a higher cc balance (about 15% of our current gross annual income and about 30% of the total available credit). I'm nervous about waiting until 2012 to buy in case the market starts to pick back up, despite what everyone says.
Yes, credit card debt impacts your qualifications. However, what many people don't realize is that if you have a large amount of debt, and then completely pay it off to show no debt, that actually counts negatively against you in many ways.
The most important way it is negative is that lenders look at it as, "these people created a lot of debt, they were responsible and paid it off, but what's going to stop them from doing it again and then potentially foreclosing on the house because their debt was too large to handle?"
Lenders don't like to see large sums paid off. They like to see consistency. If you're consistently making payments to lower your debt in a consistent manner, that is more favorable than completely paying it off.
The amount you borrow verse how much you're allowed to borrow needs to be low. With that, don't go closing accounts that are active just because you don't use them anymore. The amount allowed to borrow helps lower the ratio.
Credit card debt does not count against you very much when qualifying for a mortgage, because we only use the minimum monthly payment required in calculating your debt to income ratios. From the sounds of it you should start paying only the minimum amount due monthly immediately. You will find that liquid assets are much more important when purchasing a home than paying off some credit cards.
Only having $2000 in cc debt isnt that bad but it is still $2000 to much.
I think you are following a good approach. Others will probably say you should pay everything off first, but i think you should follow your strategy. Rates are low and home values are low, so a great time to be buying.
i'm with victor. don't pass up on amazing rates and decent prices just because you have $2,000 on credit cards. i mean, ideally you'd get rid of it first, but if you have the means to get rid of it over the next year or so AND buy a house...do it.
That might be great for you. Might not be great for someone getting things in order to purchase their 1st home.
If you can't afford to pay double the min payment on a 2k debt among 2 cards then you shouldn't be buying a home. That shouldn't be more than 100 bucks a month.
If you can't afford to pay double the min payment on a 2k debt among 2 cards then you shouldn't be buying a home. That shouldn't be more than 100 bucks a month.
It's not your deal. No one is saying the OP can't make double the payment. BUT, in saving up for her purchase of a new home paying off a small credit card balance should probably not be a top priority.
If the OP were to wait on making larger payments until 6 months after she closes how much extra interest is that going to cost her?
CASH IS KING.
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