Posts Tagged ‘income’

Prove It!

April 5, 2010

Remember those days on the school playground when one kid made some bold statement and another kid made that challenging accusation back, “Oh yeah?  Prove it!”  These days it seems no matter what you do, you need to prove what you say and who you are.  You go through the checkout at any store, pay for your purchase with a credit card or even debit card, and you are asked to show identification.  Are you really John Smith like your card says?  Prove it.  You call your utility company to ask a question on your monthly statement.  Are you really Jane Doe at the address you say?  Prove it.

Have we become a society of disbelievers that no longer trusts anything that anyone says anymore?  Unfortunately, yes.  The sad reality is that people lie and in order to protect ourselves, we ask that information provided be verified as authentic and true.

But since we also like to see the other side of the coin, this can be a good thing.  Suppose you have worked to gain expertise in a particular area, your degree and licensing can prove it.  Those pieces of paper give you authority and build trust with your clientele.  Or if you have been responsible with your finances and now have zero debt and funds to purchase that new home; your credit report and bank statements prove it.  Those written documents show you can be trusted and are a low credit risk.

When purchase or refinancing a home there is a long list of items you need to provide to your loan officer:  your social security number, date of birth, bank statements, employment information, income, etc.  What does all this personal data prove?  How are these pieces verified?

Your social security number helps identify who you are.  By comparing what you verbally say with your check stubs, credit report and tax records, not only is your identity proven, but any errors or identity theft by others against you can be found and corrected.

Bank statements not only show how much funds you have but also whether or not they are fully available to you.  They help prove you are ready with a down payment, you have full access to your accounts and that there is consistency in your monthly cash flow.

Employment and income are closely related.  In order to be able to afford your home, you need an income and that means you need a job.  Verifying your employment with your employer proves you have steady employment, what you are paid and how consistently overtime and bonuses occur.  The income you earn is used to determine if you can afford the new payments.  (Our last post addresses this topic.)  Reviewing pay stubs proves what you are paid and how often.  Your lender reviews these items (verification of employment and pay stubs) to determine the likelihood that your income will continue in order to prove you can afford your new payments.

In early conversations with your loan officer, the two of you may recognize you are well qualified and prepared for a new home loan (for either purchase or refinance), but the underwriter who approves the loan doesn’t know you.  Your loan officer works to develop a strong case in your favor to prove this loan is a good thing – for you and the lender. 

Proving it doesn’t have to be intimidating or negative.  We work for our clients to help them with the loan process.  Let us “prove it” to you.

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Physical and Financial Fitness – Who is Responsible?

February 9, 2010

We recently found a blog post by Philosophy Professor Nina Rosenstand from San Diego Mesa College where she raised the question of whether or not staying slim was a moral responsibility.  She implicitly asked who should ultimately be responsible for our own physical health, and whether or not an employer could assume this task.  While the focus of her article was on physical fitness, it got us thinking.  Who is ultimately responsible for your financial fitness? 

In the same way our weight is used as one indicator of physical health, a person’s credit score is used to portray a person’s financial fitness.  Your credit score measures your fiscal responsibility from the past up to the present.  Like your weight, this too is only one indicator of your overall financial health.   A credit score doesn’t account for factors outside of your control like a company closing leaving you without a job and therefore no income, that potentially leads to foreclosure.  Your credit score doesn’t explain a divorce that suddenly cuts your income in half. 

However, do the occurrences of life totally void us of all responsibility when it comes to our finances?  Are “we the people” to some degree responsible for this messed up economy due to our collective lack of financial accountability?  Can we be allowed to wash our hands of financial integrity just because “life” happens?  Shouldn’t we expect the unexpected to happen?   

Being financially sound (i.e.: strong credit scores, emergency savings, balanced budgets, living within our means) has many benefits such as lower health and auto insurance rates, better interest rates, and even job offers.  Should we push the blame of financial blunders onto someone else?  At what point do we say this is my life, my finances, my responsibility?  Along with teaching our children about living healthy, we need to also teach them financial responsibility.  Perhaps we might find that sound financial health can lead to better physical health.

We are not so ignorant (nor arrogant) to think that hiccups are not going to occur along the path of life.  They do.  And if you have not experienced one, odds are you will at some point.  As a company we are bound by industry and legal regulations to enforce set standards of acceptable financial health.  However, we also want to help our clients improve and maintain optimal financial health.  We cannot fix a client’s struggling credit any more than we can do sit-ups for you, but like a personal trainer we can offer guidance, suggestions and helpful ideas. 

What are your thoughts?