Should You Pay Off Debt or Save for a Down Payment First?
If you’re dreaming of homeownership in Washington, you’ve probably asked yourself this question: “Should I pay off debt first or start saving for a down payment?” The truth is, both are important—but how you prioritize them can impact your mortgage approval and long-term financial health.
Why It Matters:
Your debt-to-income ratio (DTI) and credit score are two key factors lenders look at when approving a mortgage. Too much high-interest debt can raise your DTI and lower your credit score, which may lead to higher rates—or worse, a loan denial.
Here’s How to Decide:
1. Tackle High-Interest Debt First
If you have credit card debt or personal loans with high interest rates, start there. These debts not only hurt your monthly budget but also weigh down your credit score. Paying them off can boost your score and free up cash for your mortgage.
2. Save for a Down Payment at the Same Time
Don’t wait until you’re debt-free to start saving. Even small, consistent contributions to your down payment fund will add up over time. Plus, having cash on hand shows lenders you’re financially prepared.
3. Keep Some Reserves
Avoid draining every penny for your down payment. Lenders like to see that you have a financial cushion for emergencies after closing.
How We Can Help:
At Bryte Home Loans powered by Canopy Mortgage, we work with buyers every day who are juggling debt and savings goals. We’ll review your unique situation and help you create the best strategy for success—so you can move into your new home with confidence.
📲 Ready to take the first step? Contact us today for a personalized plan!