Pay off debt or save for home buying

Guest 0.10 Dollars($)

We had great credit but with our wedding costs (we have been married since feb this year) and paying off my wife's credit card debts and student loan we don't have much in savings .i went through an accident with my old car though it didn't hurt me but my car was damaged. So I had bought a new one. The car cost 25K . I'm paying $145 a month on the car loan and yet to continue for a few years. Somewhere I feel I shouldn't have used up so much on the car, may be I could have got a cheaper one. with 4 credit cards and a student loan I have yet to pay off debt worth 15K. We have thought of buying a home and went to a lender for approval. We heard they offer a no-fee mortgage with no PMI or closing costs. But doesn’t that mean a higher interest rate? we have 5K left in savings and I am yet to do a life insurance or invest in 401k retirement plan. The credit cards are around 8-10% rates of interest. What I'm thinking of is do I use my savings to pay off debt and then start saving again or do I pay off the debt slowly without leave savings as it is. We'll be able to pay off the debt within a year or so but right now since home prices are too low, we don’t want to miss this opportunity. shouldn't we buy now or later after we pay off debt?

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.80 Dollars($)

Hello Steven.

Welcome to the Community.

It is true that home prices are lower now and interest rates are also lower. But you will have to judge whether you can afford a home loan now as you already have a car loan, 4 credit cards and also a student loan.

I don't think it is a good decision to just waste your savings to pay off the credit debts at once. Pay it on a monthly basis as you can pay it off in a year.

You have a great credit but you need to save a little bit more for the down payment and closing costs. Does your wife also earns? If so how much is your combined monthly income?

Feel free to ask the community if you have any further questions

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi Steven,

I think doing a life insurance and investing in 401k retirement plan is more important for you. And also save enough money for the down payment and closing costs as Jenkin has also suggested.

Best of luck,
Larry

jbarto65 · Joined: 04 Nov 2007 Posts: 626 -0.11 Dollars($)

With the way the economy is, you just never know, you may want to take the opportunity and buy the home now that the rates are so low. You can then pay off the bills you have, you will just have to behave and not spend anymore until you get everything but the home paid off.

jbarto65 · Joined: 04 Nov 2007 Posts: 626 -0.11 Dollars($)

Have you decided what to do? buy the home or pay off debt.

gmakerley · Posted: Fri Jun 13, 2008 10:50 am Post subject:

the timing is good to buy a home, but if you lack a comfort level in doing that while still owing a fair amount on other debt, you may well want to wait.

honestly, your comfort level is the most important thing to consider. though you haven't begun investing, as you noted, in retirement or insurance, your savings isn't all that bad at this time.

you'll certainly want to make an insurance decision soon, particularly if you plan on a home purchase (and i do not mean mortgage life insurance).

at least you're thoughtful about it...some folk will use all their cash, keep their credit card debt, and go buy the house; then find they lack any savings at all for emergencies.

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