Unless you have a large amount of money to pay for a home, you’ll need to apply for a mortgage to buy a home. For potential borrowers, many lenders use the Uniform residential loan application, also known as Form 1003, to determine if you qualify. Here’s what you need to know.

What is included in a mortgage application?

The uniform home loan application is used by the overwhelming majority of lenders in the United States, but you may come across another similar application in the process of finding financing for a home. All apps have the same goal: “To assess whether a potential borrower is financially stable enough to pay off a home loan,” says Chuck Meier, senior vice president and director of mortgage sales at Sunrise Banks in Minnesota.

According to Meier, the questions borrowers will find on the app “include information regarding their financial situation (income, payment history, wealth) as well as personal information like social security number, date of birth and history. of residence.

“Mortgage lenders will also ask you to provide documents that corroborate your financial history,” Meier says.

The uniform residential loan application, in particular, includes the following sections:

Section I: Type of mortgage and loan conditions

The first section of the mortgage application sets out the basic loan details, including the type of mortgage (conventional, FHA, USDA, or VA), the amount borrowed, the interest rate, the loan term, and the loan term. type of damping (fixed, adjustable, etc.).

Section II: Information on the property and purpose of the loan

For the second section of the mortgage application, you will need to be prepared with the details of the property, including the address, type of property (its legal description), year it was built and the number of units. if it is a timeshare unit.

This section also asks for the purpose of the loan (purchase, refinancing, construction or construction to permanent) and whether the property will be a primary residence, a secondary residence or an investment. Depending on the purpose of the loan, other information about the property may be needed.

Finally, you will be asked to define who will hold the title and the source of the deposit.

Section III: Borrower Information

This section is for borrowers, who will need to be prepared with their legal name, social security number, phone number, date of birth, current address, completed years of schooling, and marital status. If you have owned or rented your current residence for less than two years, you will also need to provide information about your old residence.

Section IV: Employment Information

Borrowers must also provide information about their employment status, including their employer’s name, address and telephone number (as well as whether they are self employed), for how many years they have held a position and in the profession, their position or title and the type of company. If you have been working for your current employer for less than two years, additional information is required on your employment history.

Section V: Monthly income and information on combined housing expenses

This section measures the money borrowers receive each month versus the money they have to spend. You will need to report your monthly income, including your base income, bonuses, overtime, commissions, dividends and interest, rental income, and any other income.

You will also need to meet your monthly expenses – current and proposed – including rent, first mortgage, other finance, risk insurance, mortgage insurance, property taxes, HOA dues and any other costs associated with your residence. Note that independent borrowers may be required to provide additional information.

Section VI: Assets and liabilities

In addition, you will need to provide information about your assets. These could be chequing and savings accounts, stocks and bonds, or a life insurance policy with cash value. (Account numbers and values ​​are required.)

On the liability side, you will need to list all the debts you carry, such as credit cards or a car loan, along with the amounts owed and the respective monthly payments. Responsibilities also include child support or alimony payments, employment expenses, and anything else you may owe.

At the end of this section, you will add your cash to all physical assets (cars, real estate, retirement funds, businesses owned) to arrive at your total assets, and add up all debts and expenses to total your liabilities. .

Section VII: Details of the transaction

As the name suggests, this section details the transaction and includes the purchase price or refinance amount, the cost of any home improvements or repairs, the price of the land (if purchased separately), estimated prepaid items and closing costs, private mortgage loan insurance (PMI) and mortgage insurance premium (PMI), if applicable, and discounts the borrower pays.

Section VIII: Declarations

In this section, the borrower (s) should answer yes or no to questions about their past financial situation, such as:

  • Have you had any outstanding judgments against you?
  • Have you declared bankruptcy or has a property been foreclosed in the past seven years?
  • Are you a party to a lawsuit?

If the answer to any of the questions is yes, you will be asked to include an explanation at the end of the application.

Section IX: Recognition and agreement

This signature section is legally binding. In this document, applicants verify that the information provided in the mortgage application is true and correct, and acknowledge that the lender may verify the information provided.

Section X: Information for Government Monitoring Purposes

The final section of the mortgage application contains optional demographic information to be provided to government agencies. If you choose to participate, you will be asked to identify your race, gender, and ethnicity so the government can verify the lender’s compliance with fair housing laws.

Applying for a mortgage: the documents you will need

Before completing the mortgage application, it is a good idea to put together the documents and information you will need to complete it in advance, especially if a mortgage lender is assisting you in person or over the phone. Here are the documents you will want to have on hand to satisfy your lender questions:

  • One month from the last pay stubs
  • W-2 from the previous two years
  • Two months of the most recent bank statements (with account numbers)
  • Income tax returns
  • government issued identification document
  • Addresses and telephone numbers to verify residency and work history for the past two years
  • Addresses of property held and statements of possible debts

Next steps

When you’re ready to apply for a mortgage, getting the best possible interest rate is key so you don’t overpay. Keep in mind that while applying for a mortgage won’t significantly affect your credit rating, your rating may have a negative impact. impact on the interest rate you get.

“In most cases, applying for a mortgage won’t significantly hurt your credit score,” Meier says. “The average is about a five-point reduction in your survey score. If you apply multiple times within a 30 day period, it will only affect your score once. “

When you compare interest rates, be sure to compare the entire loan offer and any charges that may affect your overall cost.

“Be sure to do a thorough research when buying rates by calling banks or mortgage companies or searching online – you want to know if you will need to pay points or additional fees to receive. the indicated rate, ”Meier explains. “You’ll also want to find out how long the lockout period is.”

There are usually 30, 45, and 60 day rate locks that secure your rate for the specified length of time. It is important to ensure that the foreclosure period is long enough to allow you to close on the property.

If you have questions about locking in your rate or the application in general, consult with the loan officer to express your concerns.

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