I’m trying to figure out how to do Adulting and be an Adult, and am a bit lost.
Tl;dr: we have some consumer debt, mediocre credit, and want to buy a house. We also have the cash funds to handle much of the above, but not all. So what do I do?
I currently have a $387/month car payment with ~$16,400 left on the note @ 14.9% interest (hey, I was desperate for reliable wheels…). I also have a credit card with a ~$4000 balance on it and we have at times been behind on the monthly minimum payments, which has hurt our credit rating.
We have always been diligent with our savings – “pay yourself first,” as my wise (and wealthy) grandmother once told me – and we now have the means to pay off both these consumer debts and then some. The credit card seems like a no-brainer. However, we are tenants and we would like to purchase a home. We have yet to meet with a mortgage lender, and I’d like to have some hard figures ready to present to the lender, as well as an attack plan going forward. Our credit is not stellar (but isn’t shit) due to the credit card’s outstanding balance. We will also be able to put down a sizable (~20%) down payment on a $250K mortgage.
I am a college professor with an employment contract and a union and I will have full tenure starting July of next year. My income is stable, but my wife does not work.
I’m receiving conflicting advice, so I’m turning to the Dope.
Reduce consumer debt. Especially the credit card. Maybe have a Visa for dire emergencies, but otherwise I really, really don’t want to have any CC debt. I’d like to get rid of the car payment too as that’s money that we could otherwise be plugging into a savings account.
Buy a house. We’ve been wanting to buy for years, and it’s time to shit or get off the pot. I turn 40 in… shit. 14 days. ::gulp:: We have fairly good deal rent-wise, but we do not want to live in this neighborhood anymore and it’s time to set down some roots and build equity. When we buy we plan on staying long-term, perhaps forever – we are determined to find a house that is ADA accessible or able to be remodeled as such so we can live there as old fogies as necessary.
Be able to save. This is a no-brainer. A lot of people don’t do this, we find it a necessary part of our monthly budget.
So, I guess my question(s) are:
Is there any reason not to pay off the credit card in full? We have the funds to do so.
Is there any reason not to pay off the car loan in full? We have the funds to do so. In this instance the only thing I can think of is continued monthly payments (which have always been made before the due date) will help us continue to build credit.
Assuming we pay off the CC and the car, what is the best way to build credit in addition to paying utilities on time (which I’ve heard from a financial advisor doesn’t really affect your credit unless you get something disconnected and the bill is sent to a collection agency)? One thought that I had was to apply for a gas card or similar that we could use on a limited basis to keep our credit afloat and building without being tempted (or able) to use it on Door Dash or Kroger or whatever. Hopefully this would prevent us digging ourselves into another hole but have a record of good credit usage.
Is there a sort of “best practices” approach to home buying, especially knowing that we can put down a substantial down payment? I know nothing about home buying.
Like I said, I’m kind of lost, but we’ve been saving for a while and finally hit our goal, so I’m asking… now what??
(And yes, I realize we probably should’ve had a better plan well before now, but this is the situation now, so…)