Pay down the $10,000 in unsecured debt. It gives you a much better credit score and debt-to-income ratio, so you'll be qualified for better loan products. You'll also have the extra cash on hand (the money you're saving above the $10,000 to pay off the debt) for a down payment, closing costs, new household goods, etc. One thing that lenders do when looking at your outstanding debt is to consider the original amount of the loan as the indebtedness. For example, let's say you have a $20,000 car loan, but only owe $2000 on it (it's nearly paid off). That debt counts as the $20,000 of the original loan, not the $2000 that you still owe on it. No, it doesn't make sense. But, that's how they do it. And, that's one reason why paying down debt before you buy a house is better than saving cash. You can still find loan products where you don't have to put any money down (or very little) by taking out a first mortgage and then a second for the down payment (to keep you under 80% loan-to-value on the first to avoid PMI). When you get ready to buy, contact a mortgage broker to get prequalified. At that time, you can find out what all loan products you qualify for. But, paying down that unsecured debt is your best move.