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The most important document in the entire loan process and where any attempt to get a mortgage starts. See detailed explanation and examples of each section of the mortgage loan application.
The mortgage loan application, commonly referred to as a Form 1003 - Uniform Residential Loan Application, is the single most important document in the mortgage process. It gives the lender a complete detailed view of your credit profile, including personal, employment and financial information.
If you've ever been through this process before then you know that lenders ask what seems to be countless invasive questions, but they are absolutely necessary. There are ten sections in the loan application and in this post we'll take a look at each section in detail.
By notifying the lender of the type of mortgage program you're applying for, they will know what documents to ask for.
Most mortgage loans in the U.S. are conventional or FHA. VA Loans are reserved for military families and USDA/Rural loans are for farms and other rural type properties. Other Loans would include unique loan programs, such as reverse mortgages.
Some of these questions cannot yet be answered definitively, such as the interest rate. Therefore you may type in the interest rate you received during your pre-qualification process.
Because lenders have strict guidelines as to what types of properties and mortgage loans they can lend, lenders require information on the subject property and the reason for the loan.
Provide the lender with the property address and whether this will be a purchase loan or a refinance. You must tell the lender how you plan on occupying the property; either as a primary residence, second home or investment property. How you plan on occupying your home is important and can completely change the requirements you must meet to qualify.
You must also tell your lender how you intend to hold title to the property. For example: "John Smith and Jane Smith, Husband and Wife, holding title in Joint Tenancy". Consult with your escrow or title officer to determine the best way to hold title based on your specific needs.
The source of your down payment (if a purchase) and/or closing costs must be disclosed. This is critical, especially if the source of money is a gift or borrowed. This will impact your loan terms.
The lender wants to know who is applying for the loan, which is why they need to have each borrower identified using the information you will provide herein.
Provide your full legal name, social security number, date of birth, home phone number, marital status and number of dependents. Additionally, the lender will want to know for how many years you have resided at your current address.
Before a lender agrees to approve you, they must first determine if you have the means to pay the loan back. Verified employment information is one of the primary ways to prove to the lender that you have a dependable income source.
Provide your employer's contact information, how many years you've been on the job, how long you've been in that type of work and what position you hold. If you've been working for the company less than two years, there will be room to disclose additional information about the previous company you worked for.
It's important for the lender to know how much income is received and how much money goes toward expenses every month. Lenders use this to calculate your debt-to-income ratio (DTI), which is one of several crucial factors used to approve your loan.
You are asked to disclose your base income, in addition to any bonuses, overtime, social security income, pensions, child support, alimony and any other forms of documented income. Regardless of the source, the lender is looking for what your total income looks like on a monthly basis.
Under housing expenses, list your present housing expenses and your proposed housing expenses from the new loan. If you're buying a home for the first time then you would list zero for present expenses.
Lenders look for assurances that you have sufficient collateral to repay your mortgage in the case of default, which is why they want to know what your net worth is.
You will disclose all your assets and liabilities in this section. The assets will be listed by name, value and account number, if applicable. The liabilities will come from your credit report, but be sure to list all liabilities regardless of whether or not it's listed in your credit report.
If you own more than one property, you will need to fill out the Schedule of Real Estate Owned. The lender wants to see how much net rental income or loss you receive from your investment properties.
Much of this information is not yet accurately available. However, your lender wants you to estimate the details of the transaction to show that you are aware of the possible amounts and charges.
They ask for details of your mortgage transaction, such as the purchase price (if buying a home), refinance amount (if there is an existing loan), estimated closing costs and any secondary financing.
Much of this information will be repeated in the HUD-1 and Truth in Lending Disclosures, which the lender will send to you after completing the loan application.
You're required to make declarations about the status of your citizenship and about your past and present financial obligations. Depending on how you answer, the lender may ask you for additional supporting documentation.
To complete this section, you will simply check off several yes or no answers to questions such as, if there are any judgments against you presently, if you've had a bankruptcy in the last seven years or if you've borrowed money for the down payment on the property.
You want to be completely honest in making your declarations because the lender will conduct their own research and make discoveries later on in the process, which can either delay your loan, or completely change your loan terms.
This part of the application contains your signature and the date.
By signing, you acknowledge and verify the information within the application. You also acknowledge and agree to several things, such as not using the property for illegal purposes, to occupy the property as indicated or if any financial changes occur during the loan process the lender must be notified.
Be sure to read this section carefully before signing. You will be re-signing this document in its final form with other loan documents with a notary public when it's time to fund your loan.
Lenders are required to ask these questions as it pertains to your ethnicity, race and sex. Lenders are required to supply these answers to government agencies to help enforce fair lending laws.
You can decline to answer these questions by checking off the appropriate box, or you can choose to answer them. By choosing to answer or not, there will be no difference in whether or not you will qualify for a loan and what your loan type and interest rate will be.
The mortgage loan application is the most important document in your loan process.
Go through the application carefully and be accurate when completing the loan application. It's very important to be truthful when filling out all 10 sections of the application. Whatever you are claiming in the loan application will have to be verified by supporting documentation. The underwriter will review your application and verify all documentation before they decide to approve you for a loan.
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