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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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