About Kathryn Nye Expertise I can answer questions regarding household budgeting, frugal living, debt repayment strategies, debt reduction, collection laws, specific budgeting snafus like reduced income or medical bills or utility problems, budgeting for the self employed or seasonal worker, meal planning, etc. I pride myself on honesty, so if you can`t handle the truth, I am not the right person to ask.
Experience I am a certfied credit counselor with an accredited credit counseling agency and I have operated my own website on this subject since 1996. I am a regular forum leader on the message boards of several major internet websites.
Publications My writings and website have been featured in many ezines and newspapers across the United States. The most recent references were in the Arizona Republic and on the Chick Click website. Many references to my site are in the About.com network.
Question My husband and I have over $15,000 in credit card debt. My inlaws are giving us $20,000 meant to be used towards a house down payment. Should we, instead, use some of the $20,000 to pay of the credit cards and then put the rest away in a savings account and then build up the savings account with money that would have gone towards paying credit card bills?
Answer Yes, as long as you actually DO that. You can have all the good intentions in the world but DOING what you say you want to do requires due diligence on your part.
No matter what, I think paying off the credit card debt is essential. The interest on those cards is not tax deductible but the interest on your home loan will be so paying interest on the home loan is better financially than paying the interest on the credit cards. Plus, it makes you look way better to get the home loan.
If you are really disciplined, you would take the $300 or so dollars you are paying towards the credit cards and apply it extra towards a home loan monthly. You should try to get the $20,000 in equity built up as soon as you can just to honor what your in laws mean to do for you.
Savings is a necessity and if you don't have any you should definitely develop some soon. I don't think you can do that with the $20k, though, because after you pay the debt off, you will still need some type of down payment to get in a home. That is only a 5% down payment on a $100k home. If you go through a first time home buyer program or FHA or VA loan, 3% is the required down payment. If you are conservative on your purchase, you may still have a little leftover to start a small savings.
