Loan

Who Pays When Loved Ones Leave Debt Behind?

Losing a loved one — a parent, spouse, or sibling — is difficult enough. But what if your loved one left mortgage, auto loan, or credit card debt behind? Will you now be responsible for paying those bills?

In most cases, no. Creditors can’t force you to cover the unpaid debts of loved ones who have died. But the money that your loved ones owed might cut into or even eliminate any inheritance that was meant for you or other survivors.

What usually happens

When people die, the money they owe creditors — everyone from their mortgage lender, to their auto loan providers, to their credit card companies — is collected from their estate. The estate in this case is defined as the money and assets owned solely by the deceased.

This might mean that the house your parents owned has to be sold to pay off any mortgage debt they owed. Their car might have to be sold to pay off credit card or other debts.

Whatever is left after these debts are paid off remains in the estate of the deceased. If your parents wanted to leave money behind for their children and grandchildren, the amount they wanted to bestow will be reduced by however much they owed creditors at the time of their death.

It can get more complicated

Of course, that’s the most basic course of action. In reality, money matters can get more complicated after the death of a loved one.

This is especially true when you lose a spouse. In most states, you won’t be responsible for any debt that your spouse left behind when he or she died, as long as the debt was accrued in your spouse’s name alone. If both you and your spouse share a credit card or a mortgage, then you will be responsible for making payments on that debt after your spouse dies.

If you live in what is known…

LendingHome Sets Stage to Accelerate Next Phase of Business Growth

Gains Fannie Mae Seller, Servicer Approval to Expand Consumer Home Loans;

Hires Mortgage Industry Veteran Robert Stiles as Chief Financial Officer

SAN FRANCISCO–(BUSINESS WIRE)–May 17, 2017–

LendingHome, the largest, fastest-growing mortgage marketplace lender, today announced two new business developments that will enable the company to take its business to the next level. LendingHome has gained Fannie Mae seller and servicer approval, which will allow LendingHome to expand its consumer home financing business and better serve its customers. Additionally, LendingHome named Robert Stiles, former CFO of Nationstar Mortgage, as its new Chief Financial Officer.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170517005427/en/

Robert Stiles, CFO of LendingHome (Photo: Business Wire)
Robert Stiles, CFO of LendingHome (Photo: Business Wire)

Fannie Mae Seller & Servicer

As one of the largest buyers of conforming home loans, Fannie Mae’s approval of LendingHome as a seller and servicer will enable the expansion of its home financing business and the delivery of better outcomes to its customers. By working directly with Fannie Mae, LendingHome can streamline its operations and offer better loan pricing to its customers. At the same time, LendingHome can retain the servicing of its customers in-house so that they can rely on LendingHome as their one trusted advisor throughout the life of their loan, benefitting from a true end-to-end mortgage experience.

“Passing Fannie Mae’s stringent approval guidelines is no small feat, especially for a young company that started lending only three years ago,” said Matt Humphrey, co-founder and CEO of LendingHome. “This is a testament to LendingHome’s financial strength, leading ground-up technology platform, and the quality of our processes from end-to-end.”

“LendingHome focuses on using technology innovation to create efficiencies and deliver…

6 Money Moves to Make If Your Net Worth Is Negative

One of the most illustrative financial figures to know is your total net worth. This is the value of all of your cash and assets, minus your debts. For many people, that figure is below zero.

Building a high net worth should be the ultimate goal of anyone seeking financial freedom. If your net worth is less than zero, consider making these moves ASAP. (See also: 10 Ways to Increase Your Net Worth This Year)

1. Reduce your spending

One of the most direct ways to end up with a negative net worth is to spend more than you earn. Cutting unnecessary expenditures is the first step in having a net positive income each month. This can mean some tough choices, like eliminating cable, eating out, and your annual vacation. It may also require more extreme measures, like getting by without a car.

You can help yourself by tracking your spending meticulously in a budget so you know where money is going each month. Even if you think you are already living frugally, there’s a chance you can find savings just by taking a closer look.

2. Pay off your high-interest debt

If your net worth is negative, it may be partially due to high interest credit card debt and other loans. Interest can quickly pile up and eventually overwhelm your earnings, putting you in negative net worth territory. Tackling debt starting with the highest interest rate first is called the avalanche method, and this can save you a lot of money on interest payments in the long run. Sometimes, even paying off just one credit card can make a huge difference in your financial situation. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

3. Bring in more…

How to Remove a Cosigner from a Student Loan

Adding a cosigner to a student loan has become common practice. After all, very few students can qualify for a loan based on their own income and credit profile. A cosigner is usually needed in order to get the loan approved, particularly with private student loans.

But given that student loan repayments can run as long as 25 years, does it make sense to keep your cosigner on the loan for the entire duration of the term? There are risks to your cosigner, and that’s why you should want to remove them from your student loan as soon as possible.

Why You Should Remove Your Cosigner

Cosigning a loan isn’t something that’s part of a casual arrangement. There are implications for the cosigner, which could affect his or her credit standing. It could even impair their overall financial situation. If the cosigners are your parents – which is usually the case – the best strategy is to have them removed from the loan as soon as you can.

For example, your payment history on the loan will affect your cosigner’s credit. If you make any late payments, they will show up as derogatory entries on your cosigner’s credit report, in addition to yours. Naturally, should you default on the loan, your cosigner will be called upon to satisfy the obligation. That can cause serious distress to your cosigner, particularly since student loan amounts are typically large.

Read More: How to Refinance Your Student Loans

There’s one other factor that’s seldom considered in regard to cosigner arrangements. When your cosigner goes to apply for a loan for themselves, the cosigned student loan will likely show up on their credit report. Most lenders will consider this a full obligation of your cosigner. That being the case, it’s possible that your cosigner will be declined for their own loan application, even if you have assumed full responsibility for your student loan’s repayment. When adding the student loan payment to their other obligations, the new lender may decide that their total debt ratio is too high to justify approval.

When you remove a cosigner from a student loan, you not only protect their credit, but you also free them up to borrow for their own purposes in the future. For that reason, you should actively pursue a cosigner release as soon as you are eligible.

Federal Student Loans

Most federal student loans will enable you to qualify even without a cosigner. Federal student loan programs recognize that you are in fact a student, and lack the income and credit profile typically required to support the loan. Repayment is based on your securing employment after graduation.

However, there is one federal student loan type, a Direct…

3 Ways Student Loan Debt Can Affect Your Mortgage Application

You’re ready to buy a home, but you’re also paying back federal or private student loans. Will this make it more difficult to qualify for a mortgage?

Yes. But that doesn’t mean qualifying for a mortgage while paying off student loans is impossible. Here’s what you need to understand before starting the home buying process.

Debt-to-income ratio

When determining whether to approve you for a mortgage, lenders look at something called your debt-to-income ratio. This ratio shows how much of your gross monthly income — your income before taxes are taken out — your monthly debts eat up. If your debt-to-income ratio is too high, lenders won’t approve you for a mortgage because they worry that you won’t have enough money each month to handle this significant payment.

It’s important to remember that mortgage lenders aren’t as concerned about your total student loan debt as they are about the size of your monthly student loan payments. Lenders typically want all of your monthly debts, including your new mortgage payment, to equal no more than 43 percent of your gross monthly income. So, if your total debts — again, including that new mortgage payment — are at or under that percentage, your odds of qualifying for a mortgage loan are higher.

Your student loan payments are considered part of your monthly debt by lenders. For example, if you are paying $300 a month on your student loans, your lender will count that amount when calculating your debt-to-income ratio. If that $300 payment pushes your debt-to-income ratio past 43 percent, you might not be able to qualify for a mortgage.

A deferment won’t help

Your student loan might be in deferment while you are applying for a mortgage, meaning you won’t have to start making payments on it for six to 12 months. You might think this will help your debt-to-income ratio. After all, when you’re applying for your mortgage, you aren’t making those student loan payments.

But this isn’t the case. Lenders will still count your student loan debt against you. That’s because lenders know that long before you pay off your mortgage, you’ll have to eventually start making those monthly student loan payments. Lenders don’t want your mortgage payment…

8 Times You Need to Walk Away From Your Dream Home

You think you’ve found the perfect house. But before you plunge into homeownership, you need to watch out for any warning signs this sale isn’t meant to be. Ask yourself whether any of these things apply to you. If so, buying the home of your dreams may just have to wait.

1. You can’t afford 20 percent down

The house may have everything you are looking for, but you need to make sure that the sale price isn’t beyond your means. Ideally, you want to make a down payment of at least 20 percent. This may be a substantial amount of money, but without that down payment, your lender will likely ask you to pay for private mortgage insurance — which can add hundreds of dollars a year to your homeownership costs.

Moreover, the more you can put down up front, the smaller your monthly mortgage payments will be. If you are in the market for a home but can’t hit that 20 percent mark, consider holding off on buying until you have a larger sum saved. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

2. Your mortgage payments would restrict your ability to save

Even if you have the ability to put 20 percent down on the house, you may find that the monthly mortgage payments are higher than you can reasonably afford. The U.S. government recommends spending no more than 30 percent of your gross monthly income on housing. That means if you earn $3,000 per month before taxes, you shouldn’t spend more than $900 per month on your mortgage.

You may get approved for a loan much bigger than you expected, but don’t use this as an excuse to buy more house than you can afford. If your payments are too high, you will find it harder to live comfortably or save money for anything besides housing costs. If you have to go into additional debt in order to make house payments, then your “dream home” could become more of a financial nightmare. (See also: How to Make Ends Meet When You’re House Poor)

3. You didn’t get a favorable interest rate

There are two key things that impact how much you’ll end up paying for a house: the sale price, and the interest rate on the mortgage loan. Even if the sale price is within your predetermined budget, you may find your monthly payments to be onerous if…

6 Infuriating Ways You’re Ruining Someone Else’s Credit

Your credit score is one of the biggest deciding factors in your financial health. It influences whether you qualify for the best interest rates on mortgages or auto loans, it can impact your insurance rates, and it can even determine whether you land that dream job or not.

Establishing good credit requires managing your credit accounts responsibly. But your own credit score isn’t the only one that can suffer the consequences of poor credit management. In the same way money can ruin a friendship, your financial carelessness could ruin someone else’s credit. Here’s how.

1. Charging up someone else’s credit card

Becoming an authorized user on someone else’s credit card helps build your own credit history. You’ll receive a credit card in your name, and you’re allowed to make charges on the account. But even though your name is on the card and the account shows up on your credit report, only the primary account holder receives the statements. This person is ultimately responsible for any purchases you make with the card.

If you’re an authorized user, the mature thing to do is pay whatever you charge each month. If you don’t or can’t pay, this sets in motion a chain of events that could ruin the other person’s credit.

Any purchases you charge to the account can raise the primary account holder’s balance and increase their credit utilization ratio beyond a healthy range (utilization ratio is the credit card balance compared to the credit limit). Ideally, credit utilization should never exceed 30 percent of a credit limit — the lower, the better. A high utilization ratio can lower credit scores.

In addition, ringing up charges on someone’s credit card and not paying what you owe could trigger payment problems. This can happen if the primary user doesn’t have enough money for higher minimum payments. If they can’t pay the credit card bill within 30 days, the credit card company could report the late payment to the credit bureaus. While a 30-day delinquency won’t tank a credit…