First: Pay Off Your Debt

[Roger]

It's a common mistake for home-buyers-to-be: They focus on saving as much money as possible for a down payment instead of paying off other debts. A better approach is to use extra cash to eliminate credit-card and other high-interest consumer debt — even if that means you can put down less on your future home.

First, credit-card debt is expensive and limits your ability to save. The average interest rate on credit cards now stands at 14%, or more than double the 6.1% national average for a 30-year fixed-rate mortgage, according to Bankrate.com. Second, credit-card debt will limit how much you can borrow. That's because lenders often won't allow your total monthly debt service — which includes payments for credit cards, student loans and car loans, as well as homeowner's insurance, property taxes and a mortgage — to exceed roughly 40% of your gross income.

But it is important to check with yourself that how much u can Afford. The answer to that is a function of two things: How much you can borrow and how much of a down payment you can muster. As a rule of thumb, your annual mortgage payment, taxes and homeowner's insurance shouldn't exceed 28% of your gross income. Then determine how much cash you have for a down payment, leaving yourself enough left over to pay those pesky closing costs, which can add up to 3% to 5% of your total home's value (plus a little something extra for emergency repairs once you move into your new home).

[way2thetop]

I agree with you totally. It's funny how peple think sometimes! They want to put more down to "keep their mortgage payment low", but choose not to pay down there credit card bill and carry a balance month after month! IF they were to pay off those credit card strategically...pay off the highest interest one first by paying $10 over the minimum on all other cards...then MAX out the payment for the one you pay off. When that one is done in a month or two...you shift that entire payment PLUS the minimum + 10 to the next highest interest rate card. You'll have them all paid off before yu know it!!

If people do it the other way and carry a balance on their cards and still manage to put some in savings...kudos. But think how cool it will be to use the strategy above to have all cards/debt paid off in months, then shift that massive amount you've been dumping into the cards gets shifted to your savings! WOW! Not to mention...the interest you pay on a credit card is compound interest...while a mortgage is simple interest. What a colossal waste of money a credit card is when you think about it.

[jacab2010]

Hello,

I agree with you. And its good suggestion given by you.

Thanks for sharing your information.

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