Down payment on home or pay off debt?

My wife and I have a $40,000 profit from a home we are selling now and want to know what is better: use it as a down on another home, or pay off a $25,000 car loan and $13,000 in credit cards, then buy home at 100% financing with zero other debt? My credit score is 844 my wife's is 711 paying the debt down wont effect the credit score in time for the next home purchase.

Or put it down as a down payment then immediately refinance to pay the other debt, so it can be used as a write off?

Sell the car, pay off the credit cards, and then use the rest as a down payment. Be debt free before taking on the house and get rid of that expensive car! If you don't want to sell the car, use the profit to pay off the debts and then save up for a down payment while renting for awhile. Do not 100% finance! Do you know how many people have done this recently and are now upside down in their house?! You would be one emergency away from having a serious problem on your hands. Get rid of the debt, build up a fully funded emergency fund (3-6 months of expenses), save up a down payment 20% preferably but at least 10%), and then get back into a house.

Hope this helps!

my opinion, pay off all debts first before settling for another home. that way you'll only have one debt to pay.

It all depends on how much debt you can afford to carry. If you can afford the car and credit card payments, plus a mortgage, then roll the $ into a down payment. You end up with the maximum amount of material wealth now, and pay it all of incrementally over time. This only works when you have the income to support it.

If you can't afford the payments, then use the $40k to get out of debt.

If possible, I would postpone buying a house now. The markets are still in decline and interest rates will likely go down further. Pay off the car and credit cards, then keep "paying yourself" those car and card payment amounts each month to build up savings. Do not go for 100% financing on the new house.

Would you be able to get a zero down loan? I'm not sure those exist anymore. If they do the interest rates will be quite high.

Nevertheless my belief is get the cheapest interest rate on a home loan you can get - because you will be stuck with it for 15 or 30 years. To get the best rate you'll probably have to put as much as possible down. You'll get a better rate on a 15 yr fixed then a 30 yr. But I'm guessing if you have as much debt as you do then you can't afford the monthly payments on a 15 yr loan.

I'm a big advocate of not having debt, but in your case you need to look at getting the best rate on a home cause you'll be dealing with that loan for a while.

But you seriously need to get rid of that car loan (if not getting rid of that car all together and paying cash for something much less expensive). And the credit card debt is just silly.

You need to go to the library and pick up a copy of Dave Ramsey's Total Money Makeover. It will change your life.

It doesn't appear that it makes a huge difference which way you go, you have the good effect of good credit that allows you options. I would lean toward getting rid of the CC debt and car debt, just because making payments on a car is always a losing proposition. Or you might consider getting rid of the car debt and keeping the CC debt, but still that needs to be handled, but putting some down on the house always helps as a bit of a hedge against bad economic times in the future.

The reason the housing market as well as the mortgage market are doing "poorly" is because of the individuals who purchased homes 5-6 years ago on adjustable rate mortgages, bought homes too expensive for what they really needed, and failed to pay any principle when the rates changed recently. Now would be a perfect time to buy because of the excess of homes on the market and lower prices.

Without knowing any other information this is what I would do.

If and absolutly if your monthly expenses are close to your income meaning not much left over then I would pay off the Auto loan. Even though 5.9% is relatively cheap money, your forced to pay the $25,000 in 5 years which is $482 out of your pocket each month. This will free up cash flow and you can always pay more on the mortgage if you want. Money left over ($15,000) should be applied to the mortgage.

or,

Purchase a home within your means with up to but not exceeding a 20% down payment. Anything more than 20% down goes to principle but doesn't lower your interest rate. Roughly every $1000 dollars you put down saves you $7 per month over 30 years. Home equity lines of credit can be used to consolodate your credit card debt and should when the 0% interest expires. There is no real reason to carry credit card debt if you don' have to but you can't beat 0%. The auto loan will take care of itself. Its a larger payment but that payment is primarily going to principle, 5.9 % is relatively low interest. The payments seem large because its amortized over 5 years.

A little caviat. Because of irresponsible buyers, the mortgage market and lenders have suddenly become really fussy about their lending and punished everyone, not just the ARM lendee's. It may be difficult to find 100% financing even with grade A credit. I lost 3 deals in closing because of an overnight change in policy. Someone will help you just be persistant.

I have tried it myself, here is some good informations.http://debt-consolidation.featured-resou...