Paying Down Debt

[ew0506]

Hello All,

I'm aware this has been asked in all matter of ways here, but I think I have something unique to my situation so I wanted to ask anyways.

So, I'm thinking of purchasing a home here in California, I have about 3.5% down, not 20% so, yes, PMI for a few years on a $400,000+ home. So let's say that's $14,000 down.

Now, I have credit card debt in the to the tune of the following below:

Citi - $16,000 (14%)

Discover - $8,000 (15%)

AMEX - $4,000 (14%)

My current credit score was 750, but now down to about 690.

I have about $55,000 saved up between my checking and saving accounts. My 3.5% down payment was going to come from my 401k. No, I don't have 20% in there, and don't ask why : (

Now, in this scenario, it may be easy for some, but I'm not wealthy and no one likes to give up hard-earned and saved cash. 

The big question - Would you use the cash in your account (checking/saving) to pay off all or at least parts of your credit card debt before or after you try and purchase a home?

There can be an argument made to have a better credit profile before purchasing, so pay it off or down. There can also be an argument made to buy the home first because you will need all of your extra cash for the home last-minute items like closing cost, furniture, etc etc

[SlideOrInsert]

preface this post by saying that I have never financed a home before, so I'm not familiar with the nuances...

with $28000 in revolving debt, minimum monthly payments are ~700 and ~300 is just interest. pay it or the majority of it off and keep the rest of cash on hand as an emergency fund. use the ~700 monthly towards the mortgage or extra principle payment.

[ew0506]

Yes, I was considering paying off the $12,000. Also, I have purchased a home before but backed out last minute, but that was over a year ago.

[ccquest]

And if you don't want to give up all the money, get the credit cards to 9% utilization instead (not clear on if those %s are utilization or interest rate) then move forward.

But agree that the interest on the large balances is killer to savings.

[ew0506]

@ccquest I like that idea actually, I will do some calculations and see what that comes out to be. I just hate giving up all of my saved money, but yet, I know I need to pay down some of the cards and no, I no longer use them.

Thanks!

[Citylights18]

Another approach might be to go "all-in" for the DP for a lower PMI mortgage then write a HELOC out of it to pay off your CCs.

Make the minimum payment on the HELOC and rebuild your cash.

[ew0506]

@Citylights18 Another good thought as well.