financial committment
Question: My fiancee and I are in a similar situation. After 4 years, we have got past debts of 12,000+ (some we did not know about until we started getting a credit report) down to 2,500. He had a bankruptcy in 97, but we were still able to get two loans for cars, one payment is based on the balance, we have lowered that by $100 a month and are now looking to buy a house. Our payment history looks really good, and some companies would finance us for a 3% down loan, at 6.5% (we are looking at 100,000 range homes) if we could guarantee that we would pay off the last collection bill within 6 months. We don’t want to do that because if something happens, and we lose some income, that is the one bill that we wait on. My fiancee just got a big raise, and we are trying to decide how to manage the extra money. Put it into savings for a down payment and closing costs, or pay off the last bill, and then start saving?
Answer: Why do I find this statement very scary? How can you have debts that you don’t know about until they appear on a credit report?? This is scary as well.. Would seem that you’re living paycheck to paycheck, with NO emergency fund to cover you if you “lose some income”. Pay off your debt and start an emergency savings fund. Then after the bill is paid off, start saving for a downpayment, PLUS an additional $3-5k for closing costs, and all the other stuff that comes with home purchases. My impression is that you’re making progress, but you’re not really ready to buy a home and incur that kind of a debt and financial committment.
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