Lenders may consider borrower’s children during home loan-application process

Q. I am a single mother, and I have been searching for a new mortgage to finance the purchase of a small condo for me and my kids. One loan representative asked me three times how many children I have and wanted to know details of the custody arrangement I have with my ex-husband. I did not get the loan, and I think it’s because I refused to give him the information. Isn’t this type of highly personal questioning illegal? Can I sue the bank for discrimination?

A. You could file a discrimination lawsuit against the bank, but it’s doubtful that you would win.

The federal Equal Credit Opportunity Act prohibits lenders from considering an applicant’s race, color, national origin, sex, marital status, age or religion when making a loan decision. It also prevents a bank from discriminating against an applicant simply because part of the borrower’s income may come from a welfare agency or other type of public assistance. The act also bars a lender from asking about a borrower’s future childbearing plans.

But it’s OK to ask applicants how many children they currently have, because the cost of raising the kids could have a direct impact on the borrower’s ability to repay the mortgage — especially if the children are attending a pricey private school or are involved in expensive after-school programs.

Similarly, details of the custody arrangement you have with your former spouse — as well as any child-support payments or alimony you receive — also could impact your chances of gaining loan approval. You’ll look better in the eyes of a lender if your spouse shares the child-rearing expenses and sends you a hefty alimony check each month to boot. But if you’re getting little or no financial help from your ex, don’t expect to get any bonus points when the banker reviews your mortgage application.

Q. When our golden retriever tore up our neighbor’s prize-winning rose garden a few years ago, our homeowners insurance paid nearly $600 to replant it. Now our dog has passed away, and it will cost about $750 to replace him with another purebred. Can I file another claim for the cost of the new puppy?

A. Probably not. A standard homeowners policy doesn’t provide coverage for the cost of treating a sick pet or replacing one that dies.

Some professional breeders purchase a special type of insurance that will pay them if their dogs get sick, die or are unable to reproduce. But if you don’t have such a policy, your request to be reimbursed now that your pet has gone to “doggie heaven” doesn’t stand a prayer of being fulfilled.

Q. If I form the type of inexpensive living trust that you often write about, would I still need to prepare a will, too?

A. Yes. Living trusts are increasing in popularity because they allow the assets of the trust-maker to pass quickly to the heirs without going through the costly and time-consuming probate process. But you should still prepare a will, even if you create an inexpensive trust, in part because a will is needed to distribute the assets that you intentionally or mistakenly leave out of your trust.

Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.