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kim090807 · Joined: 20 Sep 2009 Posts: 55 -0.01 Dollars($)

I am interested in buying my first home within the next year. I'm wondering which will have the better effect on obtaining a better interest rate: a bigger down payment or paying off more (or all of credit card debt). For example, which would afford a lower interest rate (given everything else the same): a 3% down payment with $5,000 in credit card debt or a10% down payment with no credit card debt?

gmakerley · Posted: Tue Sep 22, 2009 11:51 am Post subject:

first of all, it is unlikely that you will find a deal for 3% down...3.5% on fha, yes; but conventional loans with 3% down are quite rare - who's going to approve the mortgage insurance?

as for interest rate differential, there won't be any if you go with fha loans, and there might be a .25 difference on a conventional loan - again, if you can find one at either 3% or 10% down.

you have options here.

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Bigger Down Payment or Smaller Existing Debt?