Example
Buyer has $20,000.
Option A
Pay off the $20,000 car loan and eliminate a $650 monthly payment.
Option B
Use $20,000 as additional down payment.
Option A may reduce DTI more dramatically.
Another buyer might receive little qualification benefit from paying off a small debt and would be better keeping the cash.
Pay Off Revolving Debt?
Credit-card payoff can potentially improve both:
- Monthly DTI
- Credit utilization
But again, get lender guidance. The balance that helps your score may not be the same one that helps your DTI.
Do Not Close Accounts Automatically
Paying down debt and closing the account are different actions.
Closing credit can affect utilization and credit history.
Talk with the lender before you do either.
How Lisa Helps
Lisa is a Nevada REALTOR®, not a lender or financial planner. Whether to pay off debt, how much to put down and how much reserve to keep are decisions you make with your lender, your tax or financial advisors, and your own priorities.
Lisa's value is showing you what each financing scenario actually buys: which homes, which neighborhoods, which true monthly ownership costs, and which opportunities like assumable mortgages change the math. She makes sure the property search reflects the decision you and your lender make, not a generic internet rule.
Test the pay-off math yourself
Use the free, educational DTI calculator to compare your ratios with and without a car payment or credit card minimum before your lender runs the real scenario.
Educational only. A lender determines approval, the cash-to-close picture and the best use of your money.
