Pay off car or buy house?

[PokerAce]

I've recently paid off all of my debt, minus my $18,000 car loan. I have enough spare cash to pay off my car, but I also want to purchase a house before my apartment lease runs out this summer.

Would it be smarter to pay off my car (9% APR) now and save up my money for a down payment later on, or use the cash for a down payment on a house now and just continue with the car payments?

Another detail that might be important is that my wife and I are divorcing and she has a car that the loan is in both of our names, but she will be paying off. So those two car loans are the only active debt I have.

One thing I'm concerned about is getting a mortgage being self employed for less than two years. Would a $25-30k down payment on a $100-125k house get me a mortgage with little fuss and a pretty good interest rate?

[4thstreetpete]

100-125k house?

wtf, where exactly do you live? alaska? [img]/images/graemlins/confused.gif[/img]

[PokerAce]

I'm moving back to my hometown. A nice 4 bedroom, 2 bath house with a decent yard and a basement goes for around $125-150k.

Edit: There aren't many high paying jobs as it's a small town surrounded by other small towns, but being self employed, that doesn't phase me and it's a really nice place to live.

[kjander]

If you would like some advice on purchasing a home without meeting a banks token requirements for a loan you can PM me. I have done twice and am working on it for a third time. Bauight the first one at 19 with no job and got more than 100% financed and baught the second one at 21 with no job and got over 100% financed with no special programs or anything.

PS I may make you get prima min support befroe I give ryou advice, lol

[4thstreetpete]

Sounds good. When I was younger I was definately a city boy and I'd never want to live in a small town. Now that I'm older, it's much more appealing to me. A nice quiet setting by the lake seems dreamy.

Where exactly is this location?

[PokerAce]

Yeah, I live in the city now, but I've realized lately how important family is and I'd like to be closer to them. My hometown is a small place in northern West Virginia.

[snowbank]

Would a $25-30k down payment on a $100-125k house get me a mortgage with little fuss and a pretty good interest rate?

If you have decent credit, you can get 0-5% down regardless of your job situation. Not from every bank, but you can get it. The rate will be higher the less you put down, but not too much of a difference. You will definitely be able to get better than 9%(your current car payment interest) on your first mortgage.

[PokerAce]

I have decent credit. I actually got my credit report today and I'm above 680 and considered "fair". This is mainly because most of my credit is less than 3 years old. I pay all my bills on time, so there's no problem there.

My problem here is basically a matter of time. I can probably have both my car paid off and purchase a house with a $25k down payment before the end of this year if I work hard enough.

I'm just wondering if paying off my car first will make a big enough difference in the mortgage to make it worth the hassle of extending my lease and waiting longer.

I'm leaning towards waiting and paying off the car later. I currently live in a big city all by myself with my family and friends far away and I'm really looking forward to moving.

[Rhett]

Keep in mind that you're trying to decide between paying off your debt and taking on more debt. I'm sure you understand that the longer you have debt on large sums of money (weighted by intrest yadda yadda) the more it costs you.

Here are somet things about real estate now: Intrest rates are going up still, and they're probably the lowest that they will be for the next 15 years right now. This will drive down the principle value of real estate in many areas, but it could enable you to get the lowest intrest long term mortgage right now.

If you put 20% down on your home, you avoid PMI insurnace. You should try to do this if you can. If you can put 20% down on your home, you will also get an awesome intrest rate and no one will care what your job is.

I think that even though your taking on more debt by buying a home, if you're planning on living there for 15-20 years like you described in a small town, now would be a good time. Even if you can only put down 15%, that means in a few years you can avoid PMI. That might save you more money than paying off your car payment fast in the long run. Check it out.

[PokerAce]

Thanks for the input. I do plan on putting at least $25k down. I don't want to have to deal with PMI. I will also probably live in the house for many years. I'm going to be looking for something that I can build upon if my needs change.