Pay Off Debt or Save for a House? (How to Do Both)

Lenders look at three things: credit score, debt-to-income ratio, and down payment. The right order of operations depends on which one is your weakest link.

If your DTI is over 43%

Debt payoff first. You won't qualify for a conventional mortgage at all. Target the smallest balance to fully eliminate the monthly payment (DTI looks at minimums, not balances).

If your credit score is under 680

Mixed approach. Pay down credit cards to under 30% utilization (boosts score in one statement cycle), and save the rest. Avoid closing any cards.

If both are in good shape

Save for down payment first if your debt APRs are under 7%. Above 7%, kill the debt first — the guaranteed return beats most safe investments.

FHA vs conventional

FHA loans allow DTI up to 50% with 3.5% down (580 credit). Conventional loans need 620+ credit and prefer 36% DTI. Both require 2 months of mortgage payments in reserves after closing.

Try the free DebtFreely payoff calculator →

DebtFreely provides general educational information about debt payoff strategies. It is not financial, legal, or tax advice. Consult a qualified professional for advice specific to your situation.