A common mistake for home buyers to be: Focusing on saving as much money as possible for a down payment instead of paying off other debts. A better approach is to use the extra cash to eliminate credit-card and other high-interest consumer debt even if that means you putting less of a down payment on your future home.
Why? First, credit-card debt is highly expensive and limits your ability to save. The average interest rate on credit cards now stands at approximately 13.8% or more than double the 5.33% national average for a 30-year fixed-rate mortgage. Second, credit-card debt will limit how much you can borrow. That's because lenders won't allow your total monthly debt service which includes payments for credit cards, student loans and car loans, as well as homeowner's insurance, property taxes and a mortgage to exceed 40% of your gross income.
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