Let's Talk... Woman to Woman

What Does An Underwriter Do?

Ever buy or refinance a mortgage loan and wonder what the heck the Underwriter does? Since I attended formal underwriting training and underwrote mortgage loans for about 4 years- I can explain:

An underwriter is a disinterested third party who approves or declines loans. Once all the documentation required for the loan has been received and the appraisal is complete, the processor will submit the loan to underwriting. At that time, the underwriter will review all of the documentation in the loan file to make sure it meets the lenders guidelines. There are four basic rules that underwriters follow:

Collection Question

Here is a question I've been asked many times over the years in regards to collections:

"Several years ago I had a collection on my credit report. I'm trying to get a mortgage loan and now the Underwriter wants it paid. Why?"

One of the things an Underwriter does is look at your willingness to repay your debts. If you owe a creditor money and have not paid the bill- the Underwriter will question your ability to pay the mortgage debt. Open collections and charge-offs on your credit report can hinder the loan approval. These will stay on your credit report for 7 years, although some collection agencies may "re-report" the item so that it stays on even longer. Depending on the dollar amount of collection or charge-off, the Underwriter will want proof it has been paid. Sometimes, they will allow the item(s) to be paid at closing.

Divorce and Banking

Divorce is not a fun topic to talk about, yet many women are affected by it. I want to share some tips with you that I've learned along the way by working in the Bank. If you are contemplating, in the process, or have completed a divorce, there are several things you should know:

1) If you and your spouse agree to split the monthly bills owed (house loan, car loan, credit cards, etc.)- be aware that if the accounts are joint, you will still be responsible for that debt if your Ex does not pay the bill. Your divorce decree will NOT protect you if the accounts are joint. You MUST have your ex-spouse close that account and open one in their name only. This would include refinancing a house or car loan. Most attorneys do not tell their clients this; I have seen so many people affected by this scenario, usually after the damage to the credit report is done.

Credit Score Calculation

Over the years, so many people have asked me questions about credit; it is an important topic to everyone of us. It is also a complicated topic. Your credit defines who you are when it comes to borrowing money and there are many factors that determine your credit history. I wrote a series of articles for our local newpaper explaining credit which I want to share with you here. There are 3 posts in all; this one explains how credit scores are calculated:

When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they will take by loaning money to you. FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you.

Improving Your Credit Score

This is the second post in a 3-part series on credit. This post helps explain how to improve your credit score. It's important to note that raising your score takes time and there is no quick fix. Let me repeat that: there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage your credit responsibly over time. Here are some tips to help:

Payment History Tips:

• Pay your bills on time: Delinquent payments and collections can have a major negative impact on your score.
• If you have missed payments, get current and stay current: The longer you pay your bills on time, the better your score.
• Be aware that paying off a collection account will not remove it from your report: It will stay on your credit report for seven years.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor: This won't improve your score immediately, but if you can begin to manage your credit and pay your bills on time, your score will improve over time.

Credit Repair Companies

This is the third part in a 3-part series on credit. In this post, we will talk about Credit Repair Companies:

Everyday, companies nationwide appeal to consumers with poor credit histories. They promise- for a fee- to clean up your credit report so you can get a car loan, home mortgage, insurance, or even a job. The truth is- they cannot deliver. After you pay them hundreds or even thousands of dollars in up-front fees, these companies do nothing to improve your credit report. Many simply vanish with your money.

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get flyers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

• "Credit problems? No Problem!"
• "We can erase your bad credit- 100% guaranteed."
• "Create a new credit indentity- legally."
• "We can remove bankruptcies, judgments, liens, and bad loans from your credit report forever!"

Do not believe these statements. Only time, a conscious effort and a personal debt repayment plan will improve your credit report. Accurate negative credit such as bankruptcies, judgments, collections and liens cannot be removed from a credit report- no matter what the credit repair company promises you. If you decide to respond to a credit repair offer, be aware of companies that:

Starting Early

I ran across an article on MSN Money written by Scott Burns. I wish I had known this when starting out. Maybe you know someone young (your child, niece or nephew) that this can benefit- feel free to pass the info along!

Starting at the age of 16, if you were able to save $2000.00 (working, asking parents or grandparents, etc.) and invested it in a Roth IRA, it would grow, tax-free for as long as you own it. After you turn 59 1/2, any withdrawals would be tax-free.

If you invest the money in a common stock mutual fund that earns an average of 10.7% per year, at the age of 20 (4 years later), the account would be worth approximately $9378.00. Letting the money stay in the same or similar fund with the same rate of return until retirement (adding no additional money), the growth would look like this: