Down Payment vs. Paying Bills? What to do!?

Everyone, from first time home buyers to current homeowners are always curious to know, "If I should pay off some outstanding debt, small or large. Or just bunker down and save for a down payment on a house?" I want to keep in mind that Matthew Boyce or my group are not financial advisors, but Home Mortgage Lenders.  This open conversation and reasoning is to support your decision. I will do my best to answer your questions relative to your situation. Moreover, this came topic came to life, as a close friend, whom is 29 is in this SAME dilemma. I helped him, so I plan on doing the same with you. 

Down Payment: The In's and Out's

The idea of buying a home is a great idea. Renting for years puts a burden on certain people and delivers zero tangibility in a home that you have lived at for a number of years. There are multiple products that Evesham Mortgage offers, for example an FHA Loan offers a low down payment, you'll need some cash at the closing table. Saving now and saving smart will allow you to feel comfortable making this purchase.

The downside to saving for a long time to make a comfortable down payment is that you're maybe paying Rent. The large sum of cash that you have on hand may not be necessary for getting a pre-approval and getting into that desired home. 

It is important to look at your options, your monthly bills and debts and go accordingly. Could you work with the FHA down payment requirement of 3.5%? Do you want to reach $10,000 and then move forward? 

Paying off Bills: The Pros and Cons

Paying bills is an obligation and no one can admit that it is acceptable not to pay bills. The question presented here is, do you pay off all your bills and be debt-free before you buy a home? Not necessarily. 

When your paying off bills, specifically credit lines, reducing them down can be definitely positive on your score. However, paying them fully off and closing the credit line can have a negative impact. The familiar tip from professionals is to keep credit lines at or below 30% of their limits. For example, if you have a $2,500 limit, should not exceed $750. 

Now if your paying off a collection, you should talk to a mortgage advisor. From my experiences, it is great to see a collection not on a credit report. So paying it off is great in the long run for any individual, however, this brings your report current. Which may have a negative impact in the immediate future. 

Last Call

It all fizzles down to you and your lifestyle and your financial situation. Are you a person that can pay bills and save up for a down payment? Are you paying the minimum on your credit cards to save cash for a down payment? Everyone should look at their income and debts once a month to analyze and understand their obligations. If you feel the necessity to talk to a mortgage professional on getting a pre-approval and understand the down payment for that desired home, then take the leap.