Debt Reduction Not Required to Buy

Cash on hand may be more important

Q: I would like to purchase my first home in 6 months. A loan officer pulled my credit report a few months ago and I’ve almost paid off my bills. I have about another $4,000 in balances left on four accounts. Should I pay off my debt before buying a house?

A: The answer always depends on several factors, but as a general rule – no. If you’re looking to purchase a house soon, like the reader above, then you need cash for down payment (unless you’re looking at a zero down program), closing costs and then reserves.

The down payment can range from 1 percent up. In the above example, the $4,000 could go a long way toward closing. But if you spend all your extra cash to pay off that amount, then you are at ground zero again and have to start saving up for the above mentioned expenses.

 

Written By: Real Times. If you would like to continue reading, click here.

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