Wednesday, December 4, 2024

Dear Scott,
My husband and I are in debt for about 28k and have recently sold our home. We are looking to buy a more expensive house in a better neighborhood and school district for our two kids to start school in. I am currently working a lot of overtime, but am not sure if I should try to payoff some of the debt or save for a down payment. Could you please help me??
--Anna

Answer
Anna,
Great question! Actually, I was in this exact, and I mean exact debt too, situation when I purchased my house.

The answer is to save for the down payment.

If I could do it any way I want, I would prefer to pay back the debt then cash advance the down payment for the house but you can't do that. You must have a down payment from you own money to buy a house. You can have money gifted to you by family members and even borrow from your 401(k) to get the down payment. One thing you cannot do is borrow money for the down payment from credit cards.

Save, save, save.

Good luck with your new house!

Scott 

Question 2
Scott,

Thanks for the info! I just want to clarify something. We are going to borrow from my husband's 401k and we do have some savings, but should I try to save to get to a 20% downpayment and have no remaining money, or should I just pay off stuff to lower my monthly bills and put down less than 20%?

Thanks!
--Anna

Answer 2
Anna,

I would save for the 20% down payment. It sounds like your close and there is the benefit of not having to pay for mortgage insurance when you put 20% down.

Regards, 

Scott

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