One of the most common questions buyers ask me—especially young professionals and growing families—is whether they should pay off debt first or prioritize saving for a down payment. In a high-cost market like the Washington, DC metro area, this decision can feel complicated. The truth is that the right answer depends on your monthly budget, interest rates, and your long-term goals.
After more than twenty years helping buyers across DC, Maryland, and Virginia navigate this exact question, here is a simple, grounded way to think through your options.
Start with Your Monthly Numbers
Lenders focus on your monthly obligations more than your total debt amount. This means your monthly payments—not the total balance—will have the biggest impact on your ability to buy a home in Bethesda, Arlington, Northwest DC, or any surrounding market.
Understanding your monthly student loan payments, credit card minimums, car loans, and other obligations gives you clarity on where both opportunities and constraints exist.
When Paying Off Debt First Makes Sense
You have high-interest credit card debt
Credit card balances often come with interest rates significantly higher than mortgage rates. Paying these down first reduces financial stress and improves your credit score, which can help you secure better loan terms.
Your debt-to-income ratio is too high
If your DTI prevents you from qualifying for the price range that fits your lifestyle or preferred neighborhoods, paying off small or high-impact debts can quickly move you into a stronger position.
Minimum payments are eating into your monthly budget
If you feel tight every month, reducing debt may help you enter homeownership with more breathing room.
When Saving for a Down Payment Makes More Sense
Your debts are low-interest
Student loans or car loans with moderate rates often do not need to be paid off before buying. Lenders expect many DC-area buyers to carry these obligations.
You want to enter a strong long-term neighborhood
Homes in Bethesda, Chevy Chase, McLean, Arlington, Capitol Hill, and other stable neighborhoods often grow in value over time. Getting in sooner, even with some debt, can be a smart financial move.
You need savings for closing costs and reserves
Even a small down payment combined with healthy reserves can greatly strengthen your offer and loan terms.
A Combined Approach Works for Most Buyers
Many buyers in DC, Maryland, and Virginia take a hybrid approach: paying down high-interest debts while building savings gradually. This balanced strategy keeps your credit strong and builds the cash you need for a successful purchase.
How to Prioritize Your Next Step
1. Identify high-impact debts
Pay off the accounts with the highest interest rates or the highest minimum payments. These often create the biggest drag on your approval and monthly comfort.
2. Set a savings target
Most buyers aim for a down payment between 3 and 10 percent, depending on the loan program. Savings also help cover closing costs and inspection fees.
3. Strengthen your credit score
Even minor improvements in credit can lower your interest rate and improve your loan options.
4. Get pre-approved early
A lender will show you how your current debts and savings translate into an actual price range. Many buyers are surprised to learn they can buy sooner than expected.
5. Compare neighborhoods based on comfort and value
You do not need to find the perfect home—just one that fits your budget, your routine, and your long-term plans. I help buyers weigh the trade-offs between space, location, commute, and overall value.
Examples of What I See in Today’s Market
Case 1: Buyers with student loans but no credit card debt
These buyers often qualify comfortably for homes in Silver Spring, Arlington, or parts of Northwest DC without paying off student loans first.
Case 2: Buyers with strong income but high credit card balances
Paying down revolving balances can dramatically improve approval and pricing, even more than building a larger down payment.
Case 3: Growing families preparing for their next move
Often, they save for a down payment while making small, steady debt payments. This balanced approach supports both their short-term and long-term goals.
Why Buyers Work With Me on This Decision
For two decades, I have helped buyers across DC, Maryland, and Virginia navigate the balance between managing debt and planning for homeownership. Every situation is different, and my role is to provide clarity, structure, and a confident path forward. Whether you are choosing between neighborhoods, evaluating loan programs, or weighing financial trade-offs, I help make the decision feel manageable and grounded.
Final Word
There is no single right answer to whether you should pay off debt or save for a down payment first. What matters most is your monthly comfort, long-term stability, and the strategy that supports your future. With the right plan, you can move toward homeownership with confidence.
About Matt Cheney
Matt Cheney is a top-producing real estate advisor with Compass in Washington, DC, guiding buyers and sellers across DC, Maryland, and Virginia through high-stakes moves, from luxury sales to estate settlements, downsizing, and divorce-related transactions. With over $771 million in career sales volume and 22 years of experience, including more than two decades working on complex and sensitive real estate situations, Matt is known for calm, strategic guidance and brings hundreds of successful sales to clients seeking clarity and support during life transitions.