Hello I am planning on getting a mortgage in four years because of personal reasons and so during that time I want to beef up my scores, save for a down payment, build my retirement, and make sure I have the best buying power.
Credit Scores:
- I haven't pulled them lately, but I did app for some new CC and was approved. My ranges were between 620-660.
Baddies:
- 1 paid collection scheduled to drop off in 2016...am sending GW letters constantly to get this removed.
- 1 paid collection scheduled to drop off in 2021....will begin sending GW letters asap to get this removed.
- 1 paid judgment that is scheduled to drop off this year
- late on car payment 12/14....that was my fault. Forgot to hit the submit button and with the holidays I didn't check my online accounts, which would have shown me it hadn't come out of my account. Will try to GW this as well.
Debt:
- Some smaller credit card debt I am working to pay off asap. Util is currently @30%
- Consolidated student loans with Navient: @$24,000 are subsidized, @$64,000 are unsubsidized. Interest rate is @6.25% and monthly payment is $579/mo.
- Personal Loan: @$7,000. Monthly Payment is $253/mo. Have it budgeted to pay this off by the end of this year, otherwise would take approximately another three years of scheduled payment.s
- Car Loan: @$13,000 balance. Monthly Payment is $464/mo. Have it budgeted to apy this off by end of 2016 since car has a lot of miles and don't want to be upside down if I do end up needing to get another car.
Rent is currently $980 and have never been late in three years.
Income:
- $93,000/year with regular 3% raises and yearly bonus. Been employed here for 3 years and don't plan on going anywhere else.
Mortgage Plan:
- Save 20% for downpayment - thinking @$25,000 and monthly paymnt (including taxes and insurance @$1,200/mo. to feel comfortable)
Question: Would paying off my student loans or paying them down substantially help me in improving my buying power? I believe I would still have approximately $25,000 left when the time comes for home shopping.
Remember, I'm looking out four years so the personal loan, car payment, and credit cards would be paid off (with small revolving balances to keep a very low util). 
Any feedback is welcome
Open loans all fall into the DTI calculation and pretty much nowhere else. The lower your DTI ratio, the bigger your buying power. That said, the bigger your downpayment, the bigger your buying power too. Making some assumptions on the 1200/mo payment at current interest rates, DTI isn't going to be your problem at ~8K/month gross and <2200 (swag, mortgage + SL + stuff) for your DTI calculation assuming you don't buy a new car between now and then, and even then it's doable under current conventional mortgage guidelines.
I'd make the argument purely for mortgage qualification in tight time windows that it's better to hoard cash than airstrike loan debt unless you can't get over the DTI underwriting hurdle... this runs counter to the "don't have any debt unless you have to" argument but you can always kick the loan debt to the curb if you have more funds than needed to get through the downpayment hoops minus the extra interest rate paid over that time period. It's effectively the only reason I'm personally doing a 30 year instead of 15 year mortgage, I need to hoard cash for a second mortgage sometime in the future if I have theoretical kids approaching kindergarten age and I can always dump more money into the first mortgage if looks like the future DP won't be a problem either through delays in meeting a chica or not meeting her at all.
20% downpayment makes all things easier and unfortunately that collection due to fall off in 2021 is going to be problematic on your stated 4 year horizon unless you can sort it with a GW or a PFD if it's not paid yet already in keeping you out of the top tiers, but other than that I think you're setup as well as you can be at the moment with your plan.
Note: a late pay doesn't go onto the credit report unless it's 30+ days delinquent, if you paid immediately after the holidays you should typically have a fee but not a ding on the credit report?
