Hello,

I'm starting to plan out the next year for buying our first house, but I'm at a crossroads and I'm wondering which route to take.

My wife and I have a substantial amount of credit card debt that is causing our credit to be on the fair side (650). It's not an extremely large amount for what we make per year, it's about 12K. Don't ask how we got it that high, there were some unexpected emergency things we needed to pay and thus the debt.

So anyhow, we have this debt and we figure we can pay it off within 6-8 months. Currently our savings is at 0 due to the fact that we're paying off these credit cards. I have figured that we can afford a house worth 350K in our current debt situation, and 400K if we pay off the credit cards. The houses that are to our liking are 350K so there's no need for us to push our limit if we don't have to.

Now on to the issue: At this point we can either save up for a 3-4% down payment within a year, or we can pay off the cards and have no down payment to work with, but our credit would be around 730.

I'm wondering which would get a better interest rate, $0 down payment with 730 credit rating or 3-4% down with 650 credit rating.

Any help/insight/feedback is appreciated.

I've done some research on this. It looks like I will be getting an FHA loan when the time comes, and paying a 3% DP. So my new question is, will it be possible to get a grant for the down payment? Are there any programs available in California that are loose on income ceilings?

The Nehemiah program can help you out, you can read about it at getdownpayment.com. Even with this program and an FHA loan, however, you are going to need some cash to bring to the table in order to close. Using this program, however, can greatly reduce the amount needed to close.

FHA is gearing up to take another swing at removing Seller Assistance due to the extremely high number of loans using this strategy that have gone into default. They have tried in the past to eliminate these programs, but have yet to win in court. I am not sure if or when this will actually take place, but based on what I have read it makes sens for FHA to fight these programs. My suggestion would be to move quickly if Down Payment Assistance and FHA is the only route you can use. I am not sure of your income or where you live put USDA Rural Development loans may be a possible option for you to look into. It is income based and, are based, but more homes fall into the boundary then most people think.

Here are some links regarding Down Payment Assistance.

http://news.google.com/news?hl=en&tab=wn&ned=us&q=down+payment+assistance&btnG=Search+News


USDA Links

http://www.rurdev.usda.gov/

Teke, be darned sure that your lender knows these loans.
A lot of banks will not take the Seller Funded DPA programs like described above in a declining market.

Regular bond/grant monies will still work.

Check around with your county/state housing authorities for grants. But all of the ones I have seen are very strict on income limits.

**Post Removed** Spamming URL all over board.

If you can get in before they "potentially" remove Seller Paid Down Payment Assistance you can use this in combination with the seller paying your closing costs and come to closing with nothing out of pocket. It is possible and it is not rare and unique to be able to accomplish this. A Mortgage Broker would be the best avenue for finding a loan allowing this.

However, if you do purchase a home in a declining market you in fact may struggle as previously mentioned.

Do you have a 401k?