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Contributor
Posts: 108
Registered: ‎06-24-2012
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Pay off CC or save for a house

So, I have a Citicard with 4,000 out of 5,000 and chase 4,000 out if 5,000. Score is 677 trying to get to 700 or higher to qualify for a good mortgage. I would like to start process in Jan to look for a house. Should I take the money and save for house or pay down credit cards. Really need to move
Senior Contributor
Posts: 3,460
Registered: ‎09-26-2011
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Re: Pay off CC or save for a house

Our mortgage banker said to reduce credit card debt...if you've got a banker that you want to work with, call them and ask which matters more.

 

In our case, the banker wanted NO credit cards over 50% util to help with FICO score, the higher FICO score allows her more room to wiggle with DTI.

 

YMMV of course.



Current Scores: EX08: 626, TU08: 632, EQ08: Something similar. 07/30/16. Last App: 05/07/16.

Zero percent financing is where the devil lives...

Senior Contributor
Posts: 6,028
Registered: ‎04-30-2013
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Re: Pay off CC or save for a house

How long would it take you to pay down both cards? I can tell you that Uti is a large factor in your score. Not that you said you are, but I would not app for any new cards to lower your uti only because you will begin the process of mortgage pre-qual in Jan. 

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Senior Contributor
Posts: 6,028
Registered: ‎04-30-2013
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Re: Pay off CC or save for a house

[ Edited ]

****Double Post******

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Contributor
Posts: 108
Registered: ‎06-24-2012
0

Re: Pay off CC or save for a house

I can probably get them to under 50% by the end of the year, but I will not be able to save more money towards the house.

Super Contributor
Posts: 13,409
Registered: ‎04-22-2013
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Re: Pay off CC or save for a house

The advice of talking to a broker is a good idea, just don't let them HP your account.   If it really is an either-or, the question is how much have you saved (and how much could you save if you don't pay down the cc) towards the down-payment.  Where a broker might be able to help is to give you some idea of the score brackets.   So maybe getting to 700 won't help a lot compared to where you are (in which case save for the down-payment) or doing that will push you into a much better rate, saving tens of thousands over the life of the mortgage, in which case pay the cards down instead.   I also don't know how much improvement you will get from going from 80% on two cards to 50% on two cards.

Senior Contributor
Posts: 6,279
Registered: ‎08-16-2012
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Re: Pay off CC or save for a house

Also please remember if you do not put 20% down, you will pay PMI for an FHA for the LIFE of the loan. It cannot be removed as in could in tbe past. This could add an extra 1% to the rate of your loan...
Compound that over 15-30 years and see which is more expensive..
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Senior Contributor
Posts: 8,459
Registered: ‎06-05-2013
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Re: Pay off CC or save for a house

[ Edited ]

praise123 wrote:
So, I have a Citicard with 4,000 out of 5,000 and chase 4,000 out if 5,000. Score is 677 trying to get to 700 or higher to qualify for a good mortgage. I would like to start process in Jan to look for a house. Should I take the money and save for house or pay down credit cards. Really need to move

Do the math.  8,000/10,000 = 80%  which is way too high to apply for anything.  +1 for talking to a broker first though.

Established Contributor
Posts: 731
Registered: ‎08-12-2011
0

Re: Pay off CC or save for a house


youngandcreditwrthy wrote:
Also please remember if you do not put 20% down, you will pay PMI for an FHA for the LIFE of the loan. It cannot be removed as in could in tbe past. This could add an extra 1% to the rate of your loan...
Compound that over 15-30 years and see which is more expensive..

+1 for  >= 20% down. 

Frequent Contributor
Posts: 293
Registered: ‎03-08-2013
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Re: Pay off CC or save for a house

Pay your debt first, then save, that's what I'm doing!
Starting Score: EX: 650 EQ: 630 TU: 620 01/06/2014
Current Score: EX: 673 EQ: 673 TU: 643 05/06/2015 / Last App: 05/04/2015 / In the Garden Until: 01/04/2017
Desired Scores EQ 700 EX 700 TU 700
1k 2k 4k $2,200

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