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Save for mortgage down payment or pay off car loan?

We are saving for a mortgage down payment, but I'm wondering if it's better to pay off one of our car loans.  We currently have 2 car loans, each around $300 per month, each have 3 years left of payments, and total owed on each is about $10,000.  We plan on purchasing a home for no more than $200,000 and it will be at least a year from now before we buy.  We currently have $35,000. saved for the down payment.  Should we take $10,000 of that and pay off one of the vehicles, or continue saving all of it for the house down payment?
Thank you.
Also - the vehicles are our only debt...we have no credit card debt.
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February 12 2013 - US
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Answers (4)

Once factor of this is what the interest rate/ costs are on the car loans.  I am not a fan of debt, so my advice is that once you have saved enough for your 20% down payment, you should consider paying one or both of those car loans off.  It will make your new mortgage payment easier to afford, once you are ready to buy in a year. 
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February 12 2013
Depends on the interest rate on the car loans. Many car loans are less than 2%, so you are actually paying very little in interest. I think I would continue to save for the down payment. You can always add additional money to the principal of your car payment to pay off one car sooner.
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February 12 2013
You would be best served by saving more for a down payment. If qualifying is an issue, you can always pay one of the car loans off at the close of escrow. In the meantime, save as much as you can!
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February 12 2013
I say continue saving until you have the full 20% downpayment. You will get more favorable lending terms and pay less (or no) PMI. After that, if you can still pay off one car, then you could do that. Especially if you need fewer/less payments to reduce debt to income. The other thing I would recommend doing is go ahead and speak to a lender or two and see if there is anything else you can do.
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February 12 2013
 
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