Buying a house...

[bearxor]

I'm looking at buying a house and recently came in to some money that I think could make that happen.

My question is, what should I pay off in order to make myself more appealing to lenders.

I have about $5500 in credit card debt that I can pay off right now that would leave me with no credit card debt at all.

OR

I can pay off my car loan,. which is about $4500 which would leave me with only one car payment and I could pay all my cards down to 50% of their balances, which would leave me with roughly $4000 in credit card debt.

Which of these is the better option? I have about 30k in student loans that are deferred right now and still have my wife's car, which has like 28k left on it.

Also, if I pay off all of the credit card balances is it wise to pay the entire thing off or leave some token amount of money on there to maybe show that they're still in use.

Basically, I came in to 10k and plan on using 5k towards a down payment and the other 5k to pay down debt in order to get the home.

Thoughts? Suggestions?

 

[darkxshade]

oh boy

 

[tefleming]

I'd vote Credit Card debt.

It should be a simple decision based on the cost of carrying the debt (ie the interest rate).

Also, cut up the cards if you pay it off - don't let yourself get back to being that far in debt.

You might be wise to thoughtfully consider whether buying a house is the best idea - it sounds like you're already very highly leveraged.

 

[dullard]

So much to tackle in that post, so little time.

You have two car loans, one of which is massive. You have lots of credit card debt (far above what most people carry). You have a sizable student loan that you aren't even paying (deferred). You finally get some money and you want to instead go further into debt?

What is the better option? The better option is to sink $8k into the credit cards. Sink $2k into your car loan. Sell your wife's car and get one you can afford. And then start paying the student loans.

Do that and wait a year or two. If you stay low in debt, then consider buying a house. If you go on a spending spree and blow your opportunity, then never buy a house.

 

[bearxor]

Much of this debt is from several years ago when we were going through some pretty hard times. Haven't used the cards in years already and have been slowly paying them off. Already have them paid down to half of what they were. As for getting a house, it's pretty much set in stone. Have to have a place for my wife and I and her family who'll be contributing to the mortgage payment.

We had a couple years left set aside to pay off the credit card debt, and i only have a year left on my car anyways, but problems with my mothers family have forced us to accelerate the plans a little bit.

 

[bearxor]

Originally posted by: dullard
Sell your wife's car and get one you can afford.

This isn't an option. Her current car wasn't that expensive to begin with, only like 20k, but she was upside down in the car she was getting rid of and even though it was a stupid decision at the time and I can recognize that, we can't sell the car to pay the debt off and we'd then have to go and get another car anyways. We'd looked in to trading it in and getting something dirt cheap (3k or so) and still taking the balance from what they would give us for the trade in but it never works out to a reasonable amount.

I'm just asking for an opinion from two options, not for life lessons I learned a couple of years ago and am still paying for, thanks.

 

[darkxshade]

Originally posted by: bearxor

Originally posted by: dullard
Sell your wife's car and get one you can afford.

This isn't an option. Her current car wasn't that expensive to begin with, only like 20k, but she was upside down in the car she was getting rid of and even though it was a stupid decision at the time and I can recognize that, we can't sell the car to pay the debt off and we'd then have to go and get another car anyways. We'd looked in to trading it in and getting something dirt cheap (3k or so) and still taking the balance from what they would give us for the trade in but it never works out to a reasonable amount.

I'm just asking for an opinion from two options, not for life lessons I learned a couple of years ago and am still paying for, thanks.

I don't think you've quite learned your lesson yet

 

[TwiceOver]

So when you do whichever option you do here, are you going to have anything left to put down on a house? I think that is what lenders are looking for these days.

 

[dullard]

Originally posted by: bearxor
I'm just asking for an opinion from two options, not for life lessons I learned a couple of years ago and am still paying for, thanks.

Ok, I'll turn my life-lesson mode off.

Pay off your credit cards as much as you can. Banks are beginning to turn people away even if they have a good credit score if they have lots of bad debt.

You have one false idea in your OP. Credit cards almost ALWAYS have a token amount of money on them, even if you pay them off in full each month. Why? Because by the time your check clears, you have already probably made a purchase for the next month. Thus, you can pay them off in full each month, save thousands of dollars on interest, AND still show that they are in use. You gain nothing and lose everything by purposely not paying them off in full when you can.

Banks right now want to see that you (a) have credit and (b) pay off your credit. Having high balances on your credit card means you fail test (b). Having a student loan is good debt (a) but since it is deferred you aren't paying it down (b). You don't have to pay a lot on the student loan, but you have to show that you are actually paying towards the loan.

Finally, right now you really need a down payment on a house. So, again, I won't select one of your two options. You might need option #3, which is to keep that $10k for the down payment.

 

[CRXican]

It's usually better to pay off the unsecured debt first. At least the car loan has some collateral and it's obvious what you're paying for. I would say tha majority of people who drive have an open car loan on their credit (except baller ATOTers who pay cash of course).

 

[DaveSimmons]

How much higher will your mortgage payment be than your rent? Have you figured in property taxes and possibly HOA fees? Maintenance, insurance?

How long can you keep paying for everything if one or both of you are laid off?

If you're still heavily in debt and would use most of your savings for the house, it really might be better to rent for another year or two.

 

[Syrch]

I'd say the credit card debt. When I went looking for a loan that was the best jump for my score. You definitely want your balance below 30% of your limit though. At the very least.

 

[richardycc]

whats your credit score? if you have sucky score, $5000 down might not be enough, unless the house is $25000.

 

[Syrch]

Originally posted by: bearxor
Much of this debt is from several years ago when we were going through some pretty hard times. Haven't used the cards in years already and have been slowly paying them off. Already have them paid down to half of what they were. As for getting a house, it's pretty much set in stone. Have to have a place for my wife and I and her family who'll be contributing to the mortgage payment.

We had a couple years left set aside to pay off the credit card debt, and i only have a year left on my car anyways, but problems with my mothers family have forced us to accelerate the plans a little bit.

wait hold the horses. Please tell me that the mortgage amount is able to be covered by you and your wife in your current situation. That you don't need your inlaws money in order to make ends meet? Im not going to be mean or tell you what to do but i've read more times than i care to remember people in this exact situation getting screwed over ;/

 

[Syrch]

Originally posted by: CRXican
(except baller ATOTers who pay cash of course).

Wait, isn't that everyone?

 

[speg]

Put it all towards the credit cards. Next work on the car, and then student. Once all that is done, you can start saving for a downpayment and THEN you can go get a mortgage.

 

[habib89]

definitely pay off those credit cards. you dont' need to leave any "token" amount. the credit report will show that the cards are still open.

 

[MrDudeMan]

I don't care if you want life-lessons, you need them. This is a horrible idea. Waiting even one year would alleviate so much strain on your finances. I hope no one gives you a loan considering how much other debt you have and your attitude toward it. This is the kind of stuff that got us in this economic mess.

 

[PingSpike]

Originally posted by: bearxor

Originally posted by: dullard
Sell your wife's car and get one you can afford.

This isn't an option. Her current car wasn't that expensive to begin with, only like 20k, but she was upside down in the car she was getting rid of and even though it was a stupid decision at the time and I can recognize that, we can't sell the car to pay the debt off and we'd then have to go and get another car anyways. We'd looked in to trading it in and getting something dirt cheap (3k or so) and still taking the balance from what they would give us for the trade in but it never works out to a reasonable amount.

I'm just asking for an opinion from two options, not for life lessons I learned a couple of years ago and am still paying for, thanks.

The 10K you came into will not signifigantly change your financial situation no matter how it is spent. I do not know what houses cost in your area, however closing costs (in addition to the down payment) were somewhere between $3500-5000 when we bought our home.

I personally would pay the credit cards off first as they typically have the highest interest rate. However, when getting a mortgage I think they look more at your cash flow availability to pay as well as debt to income ratios so you might be better off getting rid of one of your cheaper loans entirely.

I'm not sure if you'll even have enough left over though, again, that probably depends on the price of the house, credit scores, etc.

 

[PingSpike]

Originally posted by: Syrch

Originally posted by: bearxor
Much of this debt is from several years ago when we were going through some pretty hard times. Haven't used the cards in years already and have been slowly paying them off. Already have them paid down to half of what they were. As for getting a house, it's pretty much set in stone. Have to have a place for my wife and I and her family who'll be contributing to the mortgage payment.

We had a couple years left set aside to pay off the credit card debt, and i only have a year left on my car anyways, but problems with my mothers family have forced us to accelerate the plans a little bit.

wait hold the horses. Please tell me that the mortgage amount is able to be covered by you and your wife in your current situation. That you don't need your inlaws money in order to make ends meet? Im not going to be mean or tell you what to do but i've read more times than i care to remember people in this exact situation getting screwed over ;/

Plus, I don't think that income will be counted when the mortgage company runs the numbers to decide if you can pay for the house or not. Maybe back in shady times when any warm body that could hold a pen was given a loan, but probably not now.

 

[ivan2]

if you want a house and are financing, use all of your money to pay off the debt first, starting with the credit card. With the DTI as is now I doubt anyone will be lending to you.

 

[CPA]

Originally posted by: dullard
So much to tackle in that post, so little time.

You have two car loans, one of which is massive. You have lots of credit card debt (far above what most people carry). You have a sizable student loan that you aren't even paying (deferred). You finally get some money and you want to instead go further into debt?

What is the better option? The better option is to sink $8k into the credit cards. Sink $2k into your car loan. Sell your wife's car and get one you can afford. And then start paying the student loans.

Do that and wait a year or two. If you stay low in debt, then consider buying a house. If you go on a spending spree and blow your opportunity, then never buy a house.

couldn't agree more.

 

[Mermaidman]

Originally posted by: bearxor
. . . As for getting a house, it's pretty much set in stone. Have to have a place for my wife and I and her family who'll be contributing to the mortgage payment.

Seems like a risky setup, unless you're really really tight with your in-laws. As in you're willing to lay your life on the line for them, and vice-versa!

As for your original question, I would pay off your car, or completely pay off a couple of credit cards. (Seems odd that you want to just pay 50% of all the credit cards.)

 

[rh71]

wow, that is a lot of debt... I don't want to judge but saying you have $28k left on a car payment on top of another car loan on top of student loans on top of credit card balances... I hope this is not typical of the general American public... god only knows. I wouldn't even touch a mortgage request right now if I were you - what is your living situation now that it must be done?

 

[amdskip]

Originally posted by: CPA

Originally posted by: dullard
So much to tackle in that post, so little time.

You have two car loans, one of which is massive. You have lots of credit card debt (far above what most people carry). You have a sizable student loan that you aren't even paying (deferred). You finally get some money and you want to instead go further into debt?

What is the better option? The better option is to sink $8k into the credit cards. Sink $2k into your car loan. Sell your wife's car and get one you can afford. And then start paying the student loans.

Do that and wait a year or two. If you stay low in debt, then consider buying a house. If you go on a spending spree and blow your opportunity, then never buy a house.

couldn't agree more.

:thumbsup:

What price range are you planning on looking at? You pretty much are in no condition to be buying a house. Don't take it personally but if you find a bank to actually loan you money they are taking a huge risk IMHO.