The First Time HomeBuyer magazine » divorce

Proof of Income!

admin — Tue, 24 Mar 2009 01:04:21 +0000

What qualifies as income when applying for a mortgage?

Several years ago I had a client who worked as a pastry chef who applied for his first mortgage. I asked him several qualifying questions to gather information to help him with the pre-approval process, questions such as how long he had been working as a chef, what were his available assets, and how he was compensated for his work. Was he paid hourly or salary? Was he self employed, or did he work for someone as an employee? My client stated he was not self employed and was paid a salary. I asked if he had any other income, other than the salary he received. His answer was no.

My client wanted to purchase a home priced much higher than his income could afford. His credit was outstanding, and he had a steady employment history. I set an appointment to meet with him in person. I asked him to bring some documents for my review, including his tax returns for the prior two years.

I learned a long time ago about asking questions. Sometimes it is not the question I ask but what is interrupted by the other people that determines the answer they give back.

In my client’s answer, his interpretation to my income question was that he received only his salary as his yearly income, yet after reviewing his taxes, I saw that he had the great fortune of winning the lottery not once but, yes, twice. He did not consider his lottery winnings to be income, but they were, based on the fact that the lottery payments were paid out like an annuity, which meant that they were going to continue for several years to come.

The most important issues with income are that the income can be documented and that it will continue in the future.

These are examples of other acceptable income sources that can be used in the mortgage process:

Alimony
Child support
Automobile allowances
Expense account reimbursements
Commissions
Bonus
Overtime
Permanent or temporary disability
Foster care
Interest or dividends
Second job
Part-time employment
Rental property income
Social Security
Pension
Annuity
Trust
Military pay and allowances
Veteran Affairs benefits
Section 8 vouchers
Unemployment

There are many different acceptable forms of income documentation. Proof of each source of income that is counted must be included with the application. A brief list of documents that can be used to prove income include the following:

W2 forms
Pay stubs
Award letters
Divorce decree
Bank statements
Tax returns

Applying for a mortgage can be intimidating and sometimes overwhelming, but if you have all the right documents prepared ahead of time the process will go much smoother and faster. Generally, the more documentation you give to your lender, the less risky the lender considers your loan.

Don Dryburgh is a mortgage loan officer with Countrywide Home Loans. He can be reached at 860-260-2737.

The Importance of Having a Will

admin — Sun, 22 Mar 2009 11:27:27 +0000

With all of the benefits a legal will has to offer, it is one of the best bargains available. Depending upon the complexity, wills are fairly inexpensive, particularly given the comfort of having your affairs in place in the event of your death. When you are purchasing a home, you will be around attorneys who have the ability and expertise to draft or revise a will conveniently.

Making a will is the best way of providing for those you leave behind. While you are alive, when you make precise decisions relating to your property, you alleviate many difficult issues that might otherwise trouble your family after your death. Wills make life a little easier at a very difficult time.
If you do not make a will, you die “intestate” and your property will be distributed according to a formula, which may not be your intention. Your children, your spouse or your partner may not receive the protection you would have desired. This situation is especially critical in nontraditional and blended families. The process of finalizing your estate without a will becomes complicated, costly, and time consuming.

Please note that if you do not have a will, the government generally does not take your property; however, if you have no close relatives or people in a legal family relationship who survive you, your property may go to the state under what is known as “escheat.”

Most troubling, however, is that if both parents of your children perish, your choice of who raises them will not be known, which may cause further difficulties within your families and unneeded stress on your children.

Once you have a will, you may wonder what circumstances would require a review of your will. As a general guideline, it is appropriate to review your will upon any of the following occurrences:

* Divorce or marriage
* Property that is to be transferred under the will is purchased or sold
* You or one of your beneficiaries undergo a name change
* An executor or beneficiary dies
* You enter into a domestic relationship
* You have a child

As previously noted, wills for people in nontraditional or blended families is highly advisable. Without a will, there may be legal impediments to your domestic partner sharing in your assets if you are not legally conjoined or if there is a question about the legality of your ceremony. Moreover, if you have children from a previous relationship, you may wish to make provisions for them, or you may not wish to. Without a will, children from a previous union may be put in a difficult position of whether or not to make a claim against your estate. If they are not yet adults, their legal guardian is entitled to make this decision.

Finally, a will can set up a protected fund known as a “trust,” which is a gift of money, usually to be invested, for a particular purpose. Typically parents of minor children will wish to have a trust to set up an educational fund or to prevent a child from receiving a large amount of cash when he or she turns eighteen. A trust may also be useful for charitable giving.

The law of wills is ancient and complicated, so professional assistance is a must. Using a “will kit” is highly discouraged, for a number of reasons. Without proper drafting, you could unintentionally leave complex, complicated, and unresolved issues behind for your loved ones to resolve. Even more troubling, because of the highly technical nature of the law of wills, if it is not properly drafted or signed, the will may be viewed to be totally invalid.

Mike Reiner is an attorney and president of Reiner, Reiner and Bendett PC in Farmington, Connecticut. For more information, contact him at 860-255-5001 or by Email at MReiner@reiner.com.

The 2007 Plan To Build Your Credit–Part I: Things You Can Do Today To Improve Your Credit

admin — Sat, 07 Mar 2009 23:01:20 +0000

by Thom Fox

Most of us do not strive for bad credit. Layoffs, illness, divorce, and unexpected expenses are not things we plan on or look forward to, but they happen. If you have gone through a financial hardship and your credit rating has suffered, what should you do?

Fortunately it is not incredibly difficult to reestablish a good credit history. One of the easiest ways to get started is by obtaining a secured credit card. A secured card works just like a regular credit card, but with one difference—it requires a cash deposit. Your credit limit is usually determined by the amount of your deposit. Sometimes the credit limit is equal to the amount of your deposit; sometimes it is a bit more.

Before you use the secured card, take a moment to recall what caused your credit to suffer in the first place. Did you have an unexpected hardship, such as job loss or illness? Did you take on more debt than you could handle? Did you mismanage your money? Whatever the reasons were, remember that if they happened once, they can happen again.

The next step is to ask yourself if your situation really has improved. One of the most common traps consumers fall into is that they do not change their spending behaviors to match their new situation. The best way to get a handle on your spending is to create a budget. Once you have your budget on paper, ask yourself the following questions:

Does my income cover all of my expenses? If not, you need to either reduce your expenses or increase your income. Now is not the time to take on more debt.

Do I have any savings? If not, what kind of financial cushion do you have in case of an emergency? It is recommended that you have savings equal to four to six months of expenses. For many people, it can take quite some time to save this amount of money. Chances are good that if you are trying to reestablish your credit rating, you do not want to wait that long. There are practical issues to think about, such as having the ability to purchase a car or a home in the near future, and most of us need good credit to get those. To make sure you are comfortable taking on another monthly payment, pay yourself each month just as you would pay a creditor. Continue to pay yourself for four to six months. Start by opening a savings account with your next paycheck. By paying yourself each month, you will be saving some money and showing yourself what kind of effect new debt will have on your budget.

Can I afford to make another payment on time, every month? If there is any doubt, do not take on more credit. If you miss payments, you will continue to damage your credit rating, not reestablish it.

How much of a balance can I pay off all at once? You do not want your credit limit to exceed your ability to pay the balance in full. By keeping your credit limit down, you will never find yourself overextended. Remember, with a secured credit card, your deposit determines your credit limit, so you have some control over your credit limit. This system makes it easier to keep your balance manageable.

Once you reach the point where you are getting unsolicited credit card offers in the mail, do not apply for any unless they offer favorable terms. Just keep doing what you are doing, and over time you will see better offers as your credit rating improves.

Do not open too many accounts. Having too much available credit can hurt your credit rating as well as tempt you into old spending habits.

Maintaining a good credit rating is more than making timely payments; it requires sound money management and intelligent choices.

Thom Fox is a public speaker and personal finance author who has helped develop numerous programs for young people and adults. As an expert in the field of personal finance, he has served as a guest lecturer for the Bruce Wells Scholarship Upward Bound program at Clark University and as a panelist for the Nichols College “Cycle of Debt in America” student Q & A and the California JumpStart Coalition “Innovative Financial Literacy for Youth” conference.