Buying a new home is an enormous undertaking, and it's important to get your finances in shape before you begin. Balanced Financial Incorporated invites you to follow these tips for managing your money while preparing for your future.

Know What Lenders Look For

When you apply for a home loan, all lenders look at essentially the same things: your credit score, proof of income, and debt-to-income ratio. These will be the things that determine your ability to get a loan and your loan rate should you get approved.

According to Equifax, your credit score is drawn from a number of factors, including debt, payment history, length of credit history, and available credit. You can get your full credit report for free using an online service. Your proof of income demonstrates your ability to pay your loan. Creditors want two years of work history, though some lenders will accept fewer.

Your debt-to-income ratio is calculated by using your income and your monthly debts. You can easily calculate your DTI using an online calculator. Lenders look for a DTI of 43 percent or less, so take that into consideration when assessing how to pay down debts.

Pay Down Debt

Once you know your numbers, decide which debts need to be paid down first. If one is putting your DTI over an acceptable number, focus on eliminating it as soon as possible. Otherwise, consider using the snowball method, an efficient way of paying off what you owe.

With the snowball method, you pay off your debts one at a time. While paying the minimum payments on your larger accounts, you focus first on paying off your lowest debt entirely. Then, once you've paid it off, you combine the money you would have paid on it toward the next smallest debt and so on until you've snowballed your way into debt-free living.

Know Your Expenses

Buying a home comes with certain expenses, the most notable being your down payment and closing costs. Down payments depend on the cost of your home and the down payment required for your loan. It's important to research homes in the area and mortgage down payment requirements to get an idea of how much you should save. For example, in Fort Collins, homes are selling for approximately $478,000.

Many loans will let you pay less than 20 percent down on your home, with some such as USDA requiring no down payment at all. You may have to pay private mortgage insurance if you choose to pay a smaller down payment upfront.

While closing costs are a little more difficult to narrow down, you can use an online calculator to get an idea of what your closing costs might be.

Don't Neglect Your Future

Although your priority right now is purchasing your home, it's important not to achieve it at the expense of your future ability to live a full and comfortable life. Borrowing from your retirement for a down payment, for instance, is a risky move. Engage a professional, such as the experienced team at Balanced Financial Incorporated, to help you manage your money so you don't make a misstep that could cost you your future comfort.

Prepare for your home purchase by knowing where you stand and working to improve it intelligently and quickly. With the right moves, you can land the loan you want at the rate you desire without sacrificing your retirement funds.

Balanced Financial Incorporated strives to provide families and businesses with innovative financial solutions. Call us today at (970) 204-1500 to learn more about how we can help you.

In December 2017, the U.S. Securities and Exchange Commission (SEC) filed criminal charges against California’s Woodbridge Group of Companies, LLC, along with the Group’s former owner Robert Shapiro. 281 subsidiary companies were also named in the criminal filing. The SEC charges filed against Woodbridge and Shapiro were centered on operating a complex investment scheme where nearly 8500 investors to the group of companies lost their savings. In all, more than 2000 investors lost all of their retirement savings. According to the SEC criminal filing, the fraudulent Woodbridge scheme netted the perpetrators just over $1 billion. 
Former owner and CEO Robert Shapiro was sentenced to 25 years in prison and ordered to pay back $125 million in restitution and fines. He is currently serving his sentence. Woodbridge was ordered to pay $825 million. The group of luxury real estate companies filed bankruptcy as an attempt to shield assets. Nevertheless, the distribution of funds to bilked investors is a good first step in settling the case. 
Distributions in 2020 and 2021Greg W. Anderson, a prominent retirement planning expert and the founder of Balanced Financial, Inc., made it his mission to inform the public about the Woodbridge scandal. Since the initial court filing, Woodbridge has been ordered to reimburse investors. 
The first distribution of 2021 is set to take place at the end of January. The Woodbridge Liquidation Trust declared an aggregate cash distribution of $50,000,000, which is equal to $4.28 per Class A Interest. Holders of record of these Interests will receive distributions. Four similar distributions took place in 2020; so far, these distributions equal about 30% of the total principal lost by investors. 
Several law firms and attorneys who helped create the initial scheme are being sued by the bankruptcy trustee on behalf of investors. In addition, a class-action lawsuit against Comerica Bank was filed. In that lawsuit, plaintiffs are seeking $40 million in damages, alleging that the bank aided and abetted Shapiro and other Woodbridge stakeholders in the investment scam. Greg Anderson will continue to share information and updates on the lawsuits as well as the distributions on his personal website. As the author of “Woodbridge and the Lessons Learned”, he has been an invaluable source of information for people harmed by the scheme. 

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