Proof of income

[bankworking]

Proof of income

So, one of the criteria for getting approved for a loan is that you can afford to make the payments. Because of this, many loans, particularly those to new borrowers or for very large amounts, will require proof of income before we can complete the loan.

Woman gets called by a sales rep, asked if she wants a credit review to see if she has any existing loans that we could offer lower rates on. Says yes. Turns out we can lower her auto loan rate. Plus the auto is worth more than the loan, so if she wants to increase the auto loan by some thousands of dollars, we can pay off her high-interest 24% interest credit card at the same time.

She's interested, so they put in the loan application, wherein she states her income to be $5,000 per month. Since the refinance and addition to pay off the credit card is going to run up close to $25,000,they let her know we just need her proof of income (two paystubs is most common) and get the paperwork signed, and her monthly minimum payments will be lowered by about $200 due to the rate reductions.

Then they wait. Give a call after about a week to see if she's still interested. Yes, but she can't find her paystubs. At least no recent ones. She has some from about a month and a half ago. Okay, they'll work with that since she has good established credit with good pay history. So she brings in the paystubs... only they only show an average of $3200 a month (before taxes) rather than the $5,000 she claimed. That's a bit of a difference, especially since her debt load is a bit high. Plus, she's also decided to do another application to refinance her husband's credit card for $13,000 to a new credit card. Only,on that application, he listed his income, only to find out when we asked about it that he's been retired for 3 months, hasn't gotten paid since, and is cashing in his entire pension to buy a house, so will be living on less than a third of his former income for monthly expenses (minus the rent that he won't have anymore).

AND they've just bought another car for another $25,000.

So, her income is lower than listed. His income is lower. He's getting a lump sum and not using it to pay down his credit card debt and will have practically nothing left from it for things like home repairs since the entire amount is going to the house (though he'll own that free and clear.... for now).

And it turns out that the reason she can't "find" her recent paystubs is that they went on a month and a half vacation, which she did NOT receive pay during. Plus, now that she's back at work, her jobs have slowed down, because she gets paid per house visit and "the caller doesn't like her" so isn't giving her as many jobs... so her most recent paystub is $400.

$5000 per month. To $400 for a two-week period.

The reason I'm involved? She decided to come in person (lucky me!) to yell at me for a half hour about how we shouldn't require proof of income to do loans when she's always paid all of her bills on time, and how we called her, SHE didn't ask for the refinances.


Best part? The husband, after she left to go to work, stuck around for a few minutes. Wanted to ask about the possibility of getting a home equity loan on his house once he's bought it. So... blowing his entire pension to buy a house, which on the plus side does leave you with no rent or mortgage payment, and you're ALREADY thinking about getting a loan on it?

Good payment history or not, this is rather starting to look like a bankruptcy waiting to happen.

[sirwired]

And of course since new credit cards generally require no proof of income, they'll still be able to rack up debt like there's no tomorrow up until the point they start missing payments.

[taxguykarl]

this is rather starting to look like a bankruptcy waiting to happen.

Yes, it sure is...and all your fault of course.

[Anakah]

Oh man the mere thought of making 5k a month is enough to make me drool. It would take probably about five months to make that much and I'm full time lol I'm in the wrong business!

Of course you have to prove income! When hubbie and I bought our house (only thirty years left on the bill...) we had every inch of income looked at through a freaking magnifying glass. They need to know if you can pay the damn thing what crack was she smoking??!

[Andara Bledin]

I strongly suspect since the proposed payments for the new loan were actually lower than the current loan (which was in good standing), that she thought there wouldn't/shouldn't be any questions.

But the fact that their financial situation has recently been drastically altered makes a huge difference.

^-.-^

[taxguykarl]

Of course you have to prove income! When hubbie and I bought our house (only thirty years left on the bill...) we had every inch of income looked at through a freaking magnifying glass. They need to know if you can pay the damn thing what crack was she smoking??!

When Mrs. TGK & I bought our house, we went through that as well. I even had to call a favor from our payroll supervisor because overtime was paid from a different account--he had to explain that to the underwriter.
We didn't have to go through that to re-fi. One tip I can give you, Anakah: don't be shy about appealing your property tax assessment.

[Sapphire Silk]

That's very sad. These people are setting themselves up to lose everything they've worked a life time for.

[Rapscallion]

After seeing my parents fail to handle debt, I've been very careful in making sure I know what's coming in and out and making sure I'm not spending over my income for that month unless I have funds to cover it from previous months. I scrambled like hades when I had to get a new (to me) car and had to scrounge all overtime I could get. I was in my pre-arranged overdraft for less than half the time I told the bank I'd need it for.

Debt is something I desperately try to avoid.

That said, a mate of mine is currently 50 big ones in the hole and has been playing fast and loose with house prices and so forth to try and clear it. In a declining housing market.

He's had to move to a job on the continent to get an income like he needs. Rather him than me.

Rapscallion

[PepperElf]

Good payment history or not, this is rather starting to look like a bankruptcy waiting to happen.

that's why she's yelling at you i bet.
cos it's always someone else's fault if she can't pay her bills and spends extravagantly.

[earl colby pottinger]

TV show

"Til Debt do we part", a show on people in deep dept and what they have to do to get out - and they almost always do if they follow the budget.

Watching the show I notice it is the people with the biggest incomes with the biggest debts, partly because they can pay the interest charges for the first couple of years. But thier bad spending habits sooner or later cause them to reach the point of no-return.

[Chromatix]

I do my level best to remain out of debt and to have savings in the bank. Fortunately my income is good enough to stay in the latter situation - but there have been a couple of times when I had no income at all, and then I had to survive on whatever savings and loans I could find.

To have a decent income and still be deeply in debt is a situation that I can't comprehend entering willingly. For precisely that reason, I'm planning to build up my savings so that the magical power of compound interest buys me a house, rather than doing it the other way around with a mortgage. Okay, I have to pay rent in the meantime, but it's predictable and manageable, and gives me a large cushion to fall on if times turn hard, which a mortgage would not do.

[Andara Bledin]

The reason that some of those with strong incomes end up in crippling debt is the whole 'keeping up with the Joneses' mentality.

I opted to screw giving my money to someone else and bought a house, so now I'm giving my money to past me and have a house to show for it. And, since it's a fixed rate that starts at what I was paying for rent already, I don't have to worry about anyone raising the rates, which was about to happen at the apartment, so while I have a debt to pay off, I'm also suddenly saving about $100/month and have about 3 times the room and a lot more comfort.

^-.-^