If you get a lump sum from a bonus, gift or inheritance, you’ll have to decide whether to use it to pay off debt or save for a down payment.
If you have a large amount of high-interest debt, focus on paying it off.
Eliminating or reducing debt can lower your debt-to-income ratio and help you qualify for a mortgage with a competitive interest rate.
Paying down debt can also improve your credit score. That can help you get a home loan with a low interest rate.
If your finances are in good shape and you want to buy a house in the near future, it might be better to put your extra money toward a down payment.
Putting down 20% or more can let you avoid paying for private mortgage insurance.
Talk to a financial planner to get advice regarding your specific situation and goals.
