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Pay off credit cards, or downpayment on a home?
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xgsound
Golden Member
You'll get a lot of opinions on this, so here's mine.
1. Stop charging on the credit cards.
2. Do not close the accounts. (This would affect your FICO negatively)
3. Pay off the 8K @ 19% card to zero.
This leaves you with 7K emergency cash and a smaller debt than you had. Use this as a new starting point to build up a down payment and pay down the remaining debt at the same time.
4. Apply the payment you used to make to the 8K debt to the 2K debt in addition to the minimum payment until it's gone.
5. Bank any extra money (change what habits you have to in order to have extra) with the 7K in bank.
6. When 2K debt is gone, finish off the 5K debt with the payments you used to make to the other 2 CCs.
When you complete this (and all along the way) you'll have a higher FICO score, a cleaner CC slate with more untapped credit, and money in the bank. This should give a better rate on the mortgage, and more sources to choose from.
This path is nothing sexy, but it's as clear and definate as the path to the store. When you get a house be sure to have 2K to 5K in reserve because a house is an asset only as long as you can afford to keep up the taxes and maintinance. If you can't, a house very rapidly becomes a liability.
Jim
1. Stop charging on the credit cards.
2. Do not close the accounts. (This would affect your FICO negatively)
3. Pay off the 8K @ 19% card to zero.
This leaves you with 7K emergency cash and a smaller debt than you had. Use this as a new starting point to build up a down payment and pay down the remaining debt at the same time.
4. Apply the payment you used to make to the 8K debt to the 2K debt in addition to the minimum payment until it's gone.
5. Bank any extra money (change what habits you have to in order to have extra) with the 7K in bank.
6. When 2K debt is gone, finish off the 5K debt with the payments you used to make to the other 2 CCs.
When you complete this (and all along the way) you'll have a higher FICO score, a cleaner CC slate with more untapped credit, and money in the bank. This should give a better rate on the mortgage, and more sources to choose from.
This path is nothing sexy, but it's as clear and definate as the path to the store. When you get a house be sure to have 2K to 5K in reserve because a house is an asset only as long as you can afford to keep up the taxes and maintinance. If you can't, a house very rapidly becomes a liability.
Jim
xgsound
Golden Member
Pay off the 8K, but don't close it. That would hurt FICO and it sounds like you want a high one.
Use caution when you go to the seminar. They are often just a sustained sales pitch for someone's products or services. By all means go and learn what you can for no additional money over the ($10 to $100) entrance fee. Knowledge is power, just don't expect a workable "get rich quick" scheme.
Jim
dullard
Elite Member
While there were many people here saying decent advice (ie pay off ALL of the CCs first), there was only one person I saw with the best advice:
Bingo. Some people are capable of buying homes but who never, ever should buy a home. Ilmater, you are most likely one of those people.
You honestly think I should never buy a home?! My debt has been decreasing for years and this money gives me the option to finally put it behind me. I've been working with a financial planner (who I stopped working with when he lied to my friends and sold me things just to hit sales goals) and it has increased my FICO score a lot.
Understand, while $15k in debt is a lot and I accept that, I make a lot of money. I pull in $80k gross per year, and that growth in income has allowed me to pay off these debts faster. There was a time when I was in debt for $25k.
cliftonite
Diamond Member
What kind of a house can you buy with 15k down? Or 7 now that you have paid off the 8k debt?
ViviTheMage
Lifer
That you are asking this question at all is sad. Pay off your credit cards and spend the next year or two saving up money, bringing your FICO score up, and learning to manage your finances responsibly. Don't count on your soon-to-be fiancee to take care of the budget for you. You've already shown yourself to be bad at making financial decisions, don't add a house to the mix. If you are making 80k a year as a single guy and you have 15k in high interest credit card debt, you're not in any position to be a homeowner. Houses are money pits. Many people who buy houses after living in rentals don't factor in what it costs to maintain a home. If you pay, say, 1500 a month for a rental, don't even THINK about getting a mortgage that's over 1000. Between taxes and fixing stuff, you're going to be spending a lot more than 1000. What are you going to do if you need a new roof or water heater or furnace in a couple years? Put it on your credit cards and pay 19% interest on it because you didn't plan for it?
dullard
Elite Member
I honestly think that you shouldn't buy a home YET. I'll ignore the other posts you've made in other threads and just focus on this thread. What have you said?
1) You've had debt problems in the past.
2) You aren't sure yet how to handle your money (that is why you made a thread).
3) You are starting a new life with your GF (soon to be wife).
4) You fell for buying financial items from a scammer (and are going to a potentially scamming seminar in a few days).
5) As soon as you get a good financial footing (good job + inheritance) you want to spend it.
Those 5 things together don't give me a picture of someone ready for a home now. Instead, that list reminds me of several people I knew in similar situations. What happened to them? They all had their house forclosed, taken away from them, and they are on the verge of bankruptcy. Is that guaranteed to happen to you? Of course not. But you are certainly following in their paths perfectly so far.
I urge you do to several things first before you consider a house.
1) Pay off your debt.
2) Enjoy your $80k/year income without the headache of big bills. That means you can enjoy life. Too few people remember to do this. Spend a couple years care free (where you can go on a vacation on a whim, or buy whatever you want, etc) before getting bogged down with a house and the associated debt.
3) Prove to yourself that you can save and live within your means. This means don't go to excess in what I just said above.
4) Get married.
5) Then get a house that both you and your GF will like and enjoy together in a stable life without the constant hassle of unpaid debts.
Do it for yourself, but also do it for your GF. Why would you want to burden her with your massive CC bills or mortgage when you get married? If you truely cared about her, you'd get yourself debt free. You'll have 50 years in a house. Why rush just so it'll be 51 years? Housing prices certainly aren't going to be going any higher any time soon (in most areas of the country), so waiting won't harm you. Waiting will only help.
DT4K
Diamond Member
I assume you know his FICO score then?
If not, you have no way of knowing what kind of rate he can get.
But I agree that the idea of buying a house, then using an equity loan to pay off the debt doesn't make any sense. With 15k to put down, you're not going to start with any real equity.
Pay off the CC's. It will increase your FICO and make your DTI look better, possibly allowing you to get a better rate and get into a house with very little money down. If you can afford the mortgage, there are plenty of ways to get into a house with almost zero cash.
Red Squirrel
No Lifer
One rule of thumb I always go by with credit cards is, if you don't have the actual cash, don't use it. I only use a credit card for internet shopping/services (hosting etc) but pay it off right away. In the long run you'll spend way less money since you won't be paying interest.
engineereeyore
Platinum Member
:thumbsup:
At least pay off the 19% one if nothing else.
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