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We are looking into purchasing a home (~450k) approximately 1 1/2 years from now. I have $24k of a school loan left at 3.65%, which I stretched out so it is due to be paid off in May 2003. Right now the monthly payments are ~$150. I need some advice on what my goals should be. I estimate we can save ~$35k in 1 1/2 years. I guess my options are: 1) Keep paying the $150/mo. for the school loan (which eventually increases to $230/month) and use the whole $35k to add to the down payment for the home (this would make about a 10% down payment when added to the current amount set aside for the down payment (~$19k) 2) Pay off the whole student loan, leaving me with about $30k (~6%) for the down payment or 3) Pay monthly on the student loan, so it would be paid off in 5 to 10 years, and use the rest for the down payment, leaving us somewhere in between 6% and 10% for the down payment.

I also basically asking what the student loan would do to our mortgage application in terms of being able to get a lower rate? If it will not make much difference, plus the fact that the interest is so low, then I guess it wouldn't make much sense to focus on paying it off. If the student loan will cause the mortgage rate to be significantly greater, then it would be important to pay it all off.

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