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Why You Need a Will if You Have Kids: Here’s How to Deal With it On a Budget

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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There are a few important steps in building your financial foundation that aren’t much fun to talk about.

Writing a will is right at the top of that list.

It’s obviously a morbid topic, and it’s also a step that can force you to have some difficult conversations with family members. No one likes thinking about what would happen if they die.

But it’s important precisely because it’s such a tough topic. If you don’t handle it now, all of those difficult and confusing decisions are going to be left up to other people. That could not only result in outcomes you wouldn’t want, but it may cause your family members a lot of stress and conflict.

So in this post we’ll talk about why you want a will, even if you don’t have a lot of money, how to get it handled, and how to have some of those difficult conversations with your loved ones.

The Benefits of Having a Will

The popular perception of a will is that it allows you to determine who gets all of your money and possessions when you die.

And while that is a part of what it’s for, there are other benefits to having a will that have nothing to do with money. That’s especially true if you have children.

Here are four major reasons you want to have a will in place.

1. Naming Guardians

For parents, the biggest reason to create a will is to name guardians for your children if you pass away. You can name primary, secondary, and even tertiary guardians just to make sure that you have all your bases covered.

Without a will, this decision would be made by the courts. Better to take it into your own hands to make sure that your children are always in the best situation possible.

2. Naming Custodians

A will also allows you to name custodians for your children. These are the people who would be in charge of whatever money is left to your children up until they reach adulthood (typically age 18 or 21).

The custodians are often the same as the guardians, but they don’t have to be. In any case, this is another important decision that you’ll want to be in charge of just to make sure that your children’s best interests are considered.

3. Passing Property

Of course, a will also allows you to decide who gets things like money within your savings and investment accounts, your house, and any other personal possessions you’ll be passing along.

4. Keeping the Peace

Without a will in place, all of these decisions would be left to your surviving family members. That’s not only a lot of work to put on their shoulders, but it could be the cause of fighting if people aren’t in 100% agreement about what should happen.

Talking to your family about these decisions ahead of time and being very specific in your will makes the process much easier for everyone when the time comes.

How to Get a Will in Place

There a couple of different ways you can create your will.

One option is to find an estate planning attorney in your area who can walk you through the entire process and get everything in place. Most attorneys will likely charge a couple of hundred dollars for this, though you may be able to get a discount through your employee benefits program.

There are two big reasons to consider using an attorney:

  1. If your situation is relatively complicated, such as having significant savings and investments, owning businesses, owning multiple houses, or having gone through a divorce, a lawyer can make sure that all of that is accounted for correctly.
  2. A good attorney will not only understand the law, but will take the time to ask about your personal situation and goals, clearly explain all of your options, and help you make the best decisions possible. That kind of guidance and the peace of mind it provides can be worth paying for.

The alternative is to use one of many DIY tools out there, like Nolo, LegalZoom , and Rocket Lawyer. This is the less expensive option, and it may be a good choice if:

  • Your needs are very basic, or
  • You’ll be moving to a new state in the near future, meaning you’ll need to get a new will done soon anyways. In that case it may make sense to get it done inexpensively now and pay for an attorney once you’re in the new state.

How to Talk About a Will with Your Loved Ones

Creating a will can bring up some tough conversations with your family members.

If you’re creating your own will, you may have to talk to a spouse about who you would want caring for your children, and there may be some disagreement there. You’ll also have to ask the people you want to be guardians whether they’re willing to do it, and you may run the risk of hurting feelings by not choosing people who would like to be in that position.

But it’s not just your will you need to consider. Many adult children are put into tough situations when their parents either never created a will, never updated it to reflect their changing circumstances over time, or simply never talked about their wishes with their family. That could leave you with the significant responsibility of figuring it all out after the fact, and it could also put you in the tough position of negotiating or arguing with your other family members about what should b done.

So it’s a good idea to talk to your parents about their wills too, just so the entire family can get on the same page and have a plan in place.

Here are some things to keep in mind when you have any of these conversations, to make sure they’re as positive and productive as possible:

  • Many people are uncomfortable talking about this subject, for a variety of different reasons. It may take several tries before you’re able to have a meaningful conversation, so expect that going in and be patient.
  • Start by asking the other person what they want, rather than talking about what you There’s plenty of time for you to have your say, and in the meantime you can make sure they have the chance to be heard.
  • When writing your own will, keep the feelings of your family members in mind but make sure to put the interests of your spouse and/or children first. Putting them in the best position possible is the top priority.
  • When talking to your parents about their wills, make sure to get all siblings and other family members involved. Otherwise there could be fights later on because someone feels like decisions were made behind their back.
  • Be willing to compromise, especially when it comes to who gets money and/or possessions. These are difficult decisions and it’s better to stay on good terms with the people you love than to get everything you think you’re entitled to.

Creating a will isn’t an easy topic, but it’s an important one for you to address head on both for yourself and with your parents. You will be much better off for having the conversations and for getting things in place.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Matt Becker
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Matt Becker is a writer at MagnifyMoney. You can email Matt here

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Don’t Apply for New Credit Before Your Mortgage Closes

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. Based on your creditworthiness you may be matched with up to five different lenders.

Purchase agreement for house

When you are in the process of buying a home, it’s easy to get ahead of yourself. You start shopping for all the furnishings you’ll need, lured by all the “same-as-cash” credit offers you’ll see at home-improvement stores, furniture retailers, and bed and bath shops.

The 10% discount you get by signing up might be a great savings for that purchase, but it could also cost you your mortgage, if you haven’t closed yet.

Lenders perform a variety of checks on your accounts up until the day of your closing. Any changes to your income, credit or money in the bank could not only delay your closing — it could turn a loan approval into a denial.

We’ll discuss why you shouldn’t apply for new credit before your loan closes, and suggest what to do if you already did.

Why opening new credit before closing is bad

Mortgage approval is contingent on your financial information from the day you submit the application until the day the house is recorded into your name. Many first-time homebuyers don’t realize the verification process is ongoing, even after you get the initial OK. Lenders will even double-check your employment and credit — the two biggest factors affecting the decision to lend you money — right before closing, and in some cases even the day of closing.

Below are some of the reasons why applying for new credit before closing could create problems for you before closing.

Your debt-to-income ratio could rise too high

Your debt-to-income (DTI) ratio is a measure of the total debt you owe divided by your before-tax income. Depending on the lending program you apply for, the DTI ratio maximum is anywhere from 41% to around 50%.

Your loan officer won’t usually go over what your DTI ratio is — if you’ve gotten a loan approval, you can safely assume you meet the guidelines. However, you may be right on the borderline of the maximum for your mortgage; if a new credit account balance pops up, the resulting monthly payment could you push you over the limit.

You could get a new monthly payment on your report

Many retail home goods stores offer “No payment due for 12 to 24 months” credit lines, giving buyers the impression that there will be no payment counted against them since it is the same as a cash purchase if you pay off the balance within the specified time period. However, these accounts don’t mean “no payment” to a mortgage lender.

If the creditor doesn’t report a monthly payment, the underwriter will have to calculate an estimated minimum, which may be as high as 5% of the balance of the account — so that $2,500 furniture account could add a $125 per month payment to your total debt, even if you aren’t required to make a payment to the creditor for 12 to 24 months on a “same as cash” incentive offer.

Your credit score could drop

It can take a while to find a home, and credit reports are generally only good for 90 days. If you don’t find a home and close within that time frame, your lender will have to pull a completely new credit report.

If you’ve racked up some credit cards or even inquired about new credit several times, your score could easily drop. The lower your score, the higher your rate will be, and even if you’ve locked in your interest rate, if your score drops because you charged up new credit, you’ll be stuck with whatever the rate and costs are for the most current credit score.

You might have to document your assets again

Don’t be surprised if a lender suddenly asks for some updated bank statements if you recently applied for new credit. Some borrowers are given bad advice to charge up their credit cards to use for a down payment, but credit cards have never been an acceptable source of a down payment.

The only type of borrowed money you can use would be against a fixed asset like a car or boat, and even then you’ll have to provide a lot of documentation to show how much the asset was worth, confirm you owned it at the time of the loan, and show the transfer of all the money from the lender.

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How lenders track your credit during the loan process

When you get approved for a home loan, mortgage companies are committing to lending you hundreds of thousands of dollars payable over a very long time, in most cases 30 years. Because of that, they need to make especially sure that at the time they make the loan, they can demonstrate that you have the ability to repay it.

If for some reason they make a loan you can’t afford, they face consequences from regulatory agencies, and ultimately lose money incurring the legal costs of a foreclosure. That’s why they have policies that pay special attention to how you manage your credit during the loan process.

Initial credit pull

When you apply for a home loan, one of the first things you lender will do is run an initial credit report to take a look at how you manage your credit. Sometimes the information on the credit bureaus can lag a few months, so if you recently applied for credit, make sure the balances and payments are reflected on the loan application you receive from your loan officer.

If not, provide your most current statement so the loan officer can accurately pre-qualify you for a mortgage.

Pre-closing soft pull

Once your loan approval is provided, there will be conditions that need to be met before your closing papers can be scheduled. Your loan officer will let you know if you need to provide anything, such as updated pay stubs or bank statements, before closing, and you’ll need to finalize things like your homeowner’s insurance company.

However, there are things that will be happening behind the scenes that you need to know about. One of the most important is the “pre-closing soft pull.”

A “soft-pull” is simply an update to track any activity on your credit since the initial approval. If your balance rises for something small, like charging your appraisal fee to a credit card, you won’t have anything to worry about.

What to do if you’ve already applied for new credit before closing

If you’ve already applied for new debt before your closing, don’t panic — just get the terms of the loan as soon as you can to your loan officer. The sooner you do, the sooner you’ll know if you have to take any drastic measures to fix any qualifying issues that may come up.

If there is a problem, you can take the following immediate steps.

Contact your loan officer immediately

Lenders are in the business of making loans, and the more proactive you are about communicating about any changes to your credit, income or money you have for a down payment, the sooner they can come up with a solution to keep your purchase from falling apart.

Get the terms of your new payment in writing

If the account is brand new, you’ll need to get something in writing as soon as possible that verifies what your new monthly payment will be. If you opened a deferred payment account, at least get something showing the balance so the underwriter can calculate the minimum payment that will be counted against you.

The lender will need to get it added to your credit report as soon as possible, and that process can take several days, since they have to coordinate with a third-party credit reporting agency.

Be prepared to pay it back and close it out

If you don’t qualify because of the new debt, the best plan is to pay if off and close it out, or return the items and get as much of a refund as you can. If you don’t have the assets to do that, you may have to make a painful phone call to a relative to get them to gift you money to pay it back, or you may be living on that brand new couch in their living room when your home purchase loan is declined.

You may have to switch loan programs or pay a higher rate

As mentioned above, not all DTI ratio requirements are the same. If you’re approved for a conventional loan, you’ll have a hard stop at a 50% DTI ratio, and even a fraction of a percentage over that will result in a loan denial.

You may have to switch to a more lenient loan program like the one the FHA offers, but that will mean a new approval, and potentially a new appraisal that meets the more stringent property guidelines required by the FHA. That is also the case if your score drops after updating an outdated credit report — conventional loans won’t be approvable below a 620 credit scores, while FHA will give you flexibility down to 580.

Either way, be prepared to jump through some extra hoops to undo the damage that applying for credit before closing can do to your loan approval.

Final thoughts: Avoid opening new credit until keys are in your hands

The best rule of thumb is to limit your credit use until you’ve got confirmation that the title company has recorded you as the owner of your new home, and you have the keys in your hand. If you have an emergency like a car that breaks down, or incur a major medical expense that you don’t have the cash to cover, talk to your loan officer about strategies to avoid any last minute crisis with your home loan closing.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

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How Credit Report Disputes Can Sabotage Your Chance for a Mortgage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. Based on your creditworthiness you may be matched with up to five different lenders.

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Mortgage underwriting can feel like it’s taking a lifetime when it’s standing between you and your dream home. But your lender wants to make sure that you’ll be able to repay the loan, so they’ll take the time to go over your credit history with a proverbial magnifying glass.

Before you get to underwriting, you’ll want to make sure you’re a creditworthy borrower. This means maintaining a good payment history, paying down debt and disputing any errors on your credit report.

However, credit report disputes can impact your ability to get a mortgage if they’re still pending when you’re applying for a loan. This guide will explain how and why.

Why your credit reports and scores matter

One of the first things lenders look at is your credit report, which provides information about your credit history. It details whether you’ve made on-time payments on credit cards, loans and other accounts.

The information included in this report is summed up by a credit score that generally ranges between 300 and 850. The higher your score, the more creditworthy you are perceived to be.

Although credit scores aren’t the only factor that determines whether you’ll qualify for a mortgage, your credit score heavily influences the mortgage interest rate you receive. The highest scores qualify borrowers for the best mortgage rates.

Before you begin the homebuying process, it’s smart to review your credit report and have a copy handy. You can request a free credit report once a year from each of the three major credit reporting bureaus, Equifax, Experian and TransUnion, at AnnualCreditReport.com.

It’s critical to arm yourself with this information in advance. That gives you the opportunity to dispute any inaccuracies you’ve discovered and clean up your report.

What is a credit report dispute?

Credit report inaccuracies are relatively common. Inaccurate information can happen for a variety of reasons — a credit card payment being applied to the wrong account or duplicate accounts in your report giving the impression that you carry more debt than you actually do, for example.

Not only can errors harm your credit score, but they can prevent you from qualifying for a new credit account, such as an auto or home loan. That’s why it’s important to regularly keep track of the information found in your credit reports.

When you review your credit report and find an error, you have the opportunity to formally dispute it under the Fair Credit Reporting Act This is the first step to take to get the error corrected or removed.

Fortunately, it’s easier than ever to file a credit dispute with all three credit reporting agencies online.

How to file a credit report dispute

If you’ve found an error on your credit report, take the following steps to dispute it:

  1. Provide your contact information.
  2. Identify the items in your credit report that are inaccurate.
  3. Explain why you’re disputing the info and include documentation to support your dispute.
  4. Request a correction or deletion.

You’ll also want to reach out to the creditor that is reporting inaccurate information to the credit bureaus. Let them know you’re disputing the information and provide them the same documentation you’re giving to the bureaus.

In many cases, the credit bureaus investigate disputes within 30 days, according to myFICO.com.

However, many disputes can go unresolved for long periods of time, which can be troublesome for consumers applying for a mortgage. Many loan applicants don’t realize an open credit report dispute can raise a red flag to lenders and may even prevent mortgage approval.

When to file a credit report dispute

You’ll want to file a dispute as soon as you spot an error on any of your credit reports, but if you’re thinking about buying a home in the near future, it’s best to exercise caution when filing disputes, especially right before you apply for a mortgage.

Although the dispute investigation can wrap up in 30 days, it could last as long as 90 days, so it’s best to avoid filing new disputes a few months prior to starting the homebuying process.

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How mortgage lenders view credit disputes

When a dispute is filed, credit reporting agencies are required to label the item as “in dispute.” The dispute itself doesn’t impact your FICO Score. However, your score may temporarily deflate or inflate while the disputed items are being investigated.

Mortgage lenders know credit reports with disputed items don’t paint the most accurate picture of a consumer’s creditworthiness and many require this status be removed before approving a mortgage application. This leaves some consumers with a difficult decision to make — accept costly credit report errors or delay applying for a loan until disputes have been resolved.

Here’s how lenders who provide conventional and FHA loans consider credit report disputes when determining whether a consumer qualifies for a mortgage.

Conventional loans

Both government-sponsored enterprises, Fannie Mae and Freddie Mac, have automated underwriting systems that alert lenders to existing credit report disputes. These entities don’t issue loans, but buy mortgages from lenders that follow their rules.

Fannie Mae’s system initially reviews all accounts on a borrower’s credit report, even those that are being disputed. If the borrower would be approved for the loan even with the account in question, the loan moves forward. But if the disputed account would push the borrower into the “rejection” category, the system will direct the lender to investigate whether the dispute is valid.

Lenders using Freddie Mac’s system are required to confirm the accuracy of disputed accounts. The borrower would need to have the accounts corrected before the loan can move forward.

FHA loans

FHA-approved lenders require borrowers with disputed delinquent accounts on their credit report to provide an explanation and supporting documentation about their dispute. If the account has an outstanding balance of more than $1,000, the loan must be manually underwritten, which means the loan officer has to review the loan application and supporting documents outside of the automated system.

The loan officer goes over the paperwork included in the borrower’s file very closely to determine their risk of mortgage default and whether they qualify for the loan program that they’re applying.

Disputed medical accounts are excluded from consideration, but disputed accounts that are paid on time must be factored into the borrower’s debt-to-income ratio.

How to remove a lingering credit report dispute

Gaining access to a new credit report with updated information is not an option for the borrower if the creditor won’t correct the information. And when a consumer files a complaint with the credit reporting agencies, the agencies will often defer to the creditor.

Just as you’ve reached out to your creditor and the credit reporting bureaus to file your dispute, you’ll want to take the same action to remove it. Contact the creditor directly and request that they update the account information to show that it’s no longer being disputed.

You may also want to reach out to Equifax, Experian and TransUnion to request dispute removal, but keep in mind they may also reach out to the creditor who is reporting the disputed account. See the FICO website for more information about contacting each bureau’s dispute department.

The bottom line

Dealing with an unresolved credit report dispute can turn into a consumer nightmare. Even if you’ve followed best practices, you may still be unhappy with the results.

Fortunately, you can still submit a complaint to the Consumer Financial Protection Bureau. They will forward your complaint directly to the company in dispute and work to get a response from them. Another option is to seek guidance from a consumer advocate or an attorney. The National Foundation for Credit Counseling may be a helpful place to start.

Credit reports and scores have such a strong influence on lifelong financial health, so the most effective defense is to be proactive about making sure yours are in the best shape possible. Regularly monitoring your credit profile and working to fix inaccuracies before applying for a mortgage is a good game plan to prevent major problems as you embark on the homebuying process.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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