I am getting ready to buy a house. Am I better off using the money I have for a down payment, or should I pay off some debt?
Your question can't be answered accurately without knowing more about your financial situation. How much do you have in savings? What are your debt ratios? How much were you considering putting down? What interest rates are your debts at? As you can see, the question is a bit more involved than many might think. You will need funds for your down payment, closing costs not covered by seller, and (perhaps) reserves if required by Fannie/Freddie's underwriting programs. My best advice is to have a loan officer look at your credit report, income, and assets so you can get informed, precise information, rather than educated guesses. I'd be glad to help, or you can certainly consult with any lender. Hope that helps! Ted | 07.27.15 @ 20:11
I'd be interested to know what "getting ready to buy a house" means. Are you just starting to think about it? Are you in the search process? Or are you ready to sign the paperwork? Your goals and some financial realities help dictate the best use of funds. Have a financial planner take a look at your overall situation. A mortgage lender can be helpful, but their job is to close loans and some are paid based on their total loan volume. An independent review is the best solution to finding an answer. | 08.04.15 @ 20:27
Perhaps both. As a Financial Advisor not a mortgage broker, my main concerns are affordability.
On Debt- We generally want to be able (cash flow + equity) to pay off all of our debt in 3 yrs or less.
On the down payment- where else can you put the $$ for a greater return on investment?
Let's say you have no debt and put 20% or $100k down on a $500k home.
1) What will that home be worth in 30 yrs?
2) What are the sum total of all my payments over those 30 yrs?
3) What if I pay off the house in 10 yrs by only putting 10% down and investing the other 10%?
4) What are my living expenses?
1) Using the last 15 yrs as a guide and current ZIRP or similar, the home has a very wide range. A double would be $1M- ask again in 30 yrs
2) Around $800K in payments
3) Put $50K in an investment and in ~10 yrs you could have enough to pay off the mortgage. Do that and you pay yourself the mortgage for the next 20 yrs.
4) Together we can help you determine how long your income will exceed your expenses.
Send me a message and we can discuss-no obligation
It's not what you make, it's what you keep that determines your lifestyle.
| 03.17.16 @ 18:23
If you are carrying high Interestrate double digits unsecured loans, you are better off paying them off first then use the rest of money for down payment for your house. | 03.17.16 @ 19:35
Understanding your monthly budget is a better determinant of how you should allocate your cash-on-hand. Other things that will impact your decision would be the loan program that you're potentially eligible for in your market area. Seek out a local mortgage professional who can give your better guidance based on your specific situation. | 06.14.16 @ 18:32