Home Buying in Englewood>Question Details

Otis, Home Buyer in 07631

Pay off debt or save down payment first

Asked by Otis, 07631 Fri May 3, 2013

I currently have about $17000 owed in an auto loan and $20000 saved up as a down payment in addition to a $10000 emergency fund. My question is should I just use part of my savings to pay off my car which has a 4% interest rate and start over from scratch to build my down payment fund or save for a down payment until I'm at 20% which would be approximately $50,000 in my area which would help me avoid PMI? It would take me almost a year to build up that much money again and I'm afraid that in that time interest rates of home loans will go back up or home prices will go up. Will having the car loan affect my ability to get a home loan (ie interest rate/loan amount approved)? If it makes a difference I have an excellent credit score and have been employed in the same institution for at least 5 years.

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Otis:

With one installment (car payment) you will be okay. The question isn't to pay off or not, the question is what is the monthly on the car payment and what kind of housing payment can you afford. If you find homes you like in the price range provided by your Mortgage Broker, then you are good to go.

Call up a local Mortgage Broker in your area to go over all of your options. You are in a uch better place than many first time home buyers.


Best of Luck;

Christina Solorzano;
CEO & SR Credit Repair Specialist at
Everlasting Credit Repair
Ex-Mortgage Broker of more than 10 years
http://www.everlastingcredit.com

We also have a DIY package.
0 votes Thank Flag Link Fri May 3, 2013
The mortgage interest rate is at its historical low these days. And who knows how long will it stay this low.

Who knows how much it will go up to next year, if it does?

Moreover, the price of homes is shifting. It is, without a doubt, going up. Since, market trend is local, I can't tell the same thing in your area.

The low interest rate plus the price of home. These are two factors you need to consider.

Your best route is to sit down with a local loan officer to go over with him some options to help you with your decision.

Best.

Maria
0 votes Thank Flag Link Fri May 3, 2013
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