> I decided to start saving up for a down payment for a house, which I
> plan to purchase in 6-8 months. Before making this decision, I put a
> chunk of my savings into my two auto loans, in addition to my regular
> payments. For the two auto loans, they list my next payments due
> sometime in 2009.
>
> I was considering not making my regular monthly payments for a few
> months so that I can save that money towards the down payment of the
> house. I am concerned, however, that this may negatively impact my
> credit score because the payments will appear to be erratic and then
> stop suddenly (even though no payments are technically due).
>
> So, should I continue making the monthly payments to appear less
> erratic or save the money for the down payment, so that I can
> hopefully avoid PMI? :)
>
> Thanks for any advice!
You need to weigh 2-3 factors for buying the house.
1) have you signed anything for the house? If yes, then that timeline
trumps my other 2 suggestions.
2) The bank will look at debt to income ratio, I would suggest paying
off the cars, especially the one at 11.64% interest rate. The money
you free up can then be used to accumulate down payment.
3) consider a loan with less than 20% down. 80-5-15, where you put
15% down, have a first mortgage for 80% LTV and a second mortgage for
5% LTV.
I would free up cash flow by paying down debts, then use the debt
payoff to bump up the credit score. If you paid down on the 1.9% loan
before paying off the 11.64% loan, you need to take a step or two back
and ask what are you trying to accomplish? I would pay off the loan
with the higher interest rate first, then reasses priorities. A house
will not appreciate at 11.64%, neither will a savings account, so make
financial decisions which make sense is my advice.
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