My wife and I are hoping to build a new home in a couple of years. We are expecting a small inheritance in the near future and I'm struggling with the best thing to do with it. One way or the other, we plan on using this money to help us achieve our dream of building our dream house. My options, as I see them, are to either pay off one of our student loans and thus reducing our monthly bills, or putting the lump sum towards the house and thus reducing our mortgage bill. If I put it towards the student loan, we'll be financing close to 100% on the mortgage. What do you guys think would be the way to go?

I think you should payoff any consumer debt first, credit cards etc. Then you should keep aside enough to cover 3 to 6 months expenses. Anything left should go toward down payment, and your payment should not exceed 25% of your take home pay on no more than a 20 year note.

Do not let your dream home become a burden. Spend the next two years on a tight budget and pay down your debt as much as possible. Do not use every penny you have to get into the house.

I suggest you read books like The Total Money Makeover by Dave Ramsey, The Millionaire Next Door, The Wealthy Barber before you make any big financial decissions. Learning good money managing skills now will help you to better utilize your assets to prosper.

I'm now beginning to prosper, but have wasted many years before learning these skills. I hope you learn these skills before you are to old to prosper.

Pay off the student loan.

Continue renting while you pay off all of your other credit obligations.

When you are free from everyone, then think about buying a home, but not before.

Don't finance 100%. That means that you can't afford a down payment. If you can't do that, you can't afford the unexpected upkeep on your house. A new roof is about $5000, new AC/Heat is about $2000, electrical work $1000-$2000, siding and windows at least $5000 each.

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Definitley deal with the debt first... especially given the housing market at the moment.

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