Pay off autoloan or add to downpayment (First Time homebuyer)

[Anonymous]

Lots of good info on this site!

My wife & I are ready to purchase our first house the beginning of next year, and I'm curious if it would be better for me to have a bigger downpayment, or less outstanding debt?  I will have $10K saved up, but would it be better to have $18K downpayment and $8K autoloan, or, $10K downpayment, and $0 autoloan?

My current situation if needed:

Annual salary: $68k

CC debt: $6500 (will be 100% paid off in roughly 6 months)

Car# 1: $17K

Car# 2: $8K (this is the one i'm considering to pay off)

Savings: will have $10K (+8K in question) saved up at time of purchase.

House will be roughly $180K

Credit score is currently 642

Bankruptcy discharged Nov 01

No open collections

[Anonymous]

If it were up to me, I would use the savings to pay off the auto loan. I'd rather have less monthly obligations in addition to the mortgage. Also, if you plan on using an additional 8k for a downpayment, that will only reduce your payments by several tens of dollars (but probably no more than $100/mo), which is less than what you are paying towards your auto interest.

[llecs]

Welcome to the forums. Bump because I'm in the same boat.

[ShanetheMortgageMan]

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Jason1980 wrote:

Lots of good info on this site!

My wife & I are ready to purchase our first house the beginning of next year, and I'm curious if it would be better for me to have a bigger downpayment, or less outstanding debt?  I will have $10K saved up, but would it be better to have $18K downpayment and $8K autoloan, or, $10K downpayment, and $0 autoloan?

My current situation if needed:

Annual salary: $68k

CC debt: $6500 (will be 100% paid off in roughly 6 months)

Car# 1: $17K

Car# 2: $8K (this is the one i'm considering to pay off)

Savings: will have $10K (+8K in question) saved up at time of purchase.

House will be roughly $180K

Credit score is currently 642

Bankruptcy discharged Nov 01

No open collections

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What are the anticipated minimum monthly payments on your debt you expect to have at the time you go for the mortgage?

[Anonymous]

I will have my car# 1 payment of $330 for sure, and car# 2, the amount in question, is $205. 

[ShanetheMortgageMan]

You should be fine to qualify for the mortgage either way, however if you don't pay off the car loan and use the funds for down payment or reserves that could look better to the lender (if you don't already have additional reserves in the first place).  You have the luxury of choosing either way because you could qualify either way, so I'd do what makes more financial sense which is probably paying off/down the debt with the highest interest rate (auto vs. mortgage).