Unless you have a significant chunk of cash to pay for a home outright, you’ll need to apply for a mortgage in order to buy a home. For prospective 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 Residential Loan Application is used by the overwhelming majority of lenders in the U.S., but you may come across another similar application in the process of finding financing for a home. All applications have the same purpose: “to gauge whether a potential borrower is financially stable enough to pay back a home loan,” explains Chuck Meier, senior vice president and mortgage sales director at Sunrise Banks in Minnesota.
According to Meier, the questions borrowers will find on the application “include information regarding their financial situation (income, payment history, assets) as well as personal information like Social Security number, date of birth and residency history.
“Mortgage lenders will also require you to provide documentation that corroborates your financial background,” Meier says.
The Uniform Residential Loan Application, specifically, includes the following sections:
Section I: Type of mortgage and terms of loan
The first section of the mortgage application defines the basic details of the loan, including the type of mortgage (conventional, FHA, USDA or VA), the amount being borrowed, the interest rate, the loan term and type of amortization (fixed, adjustable, etc.).
Section II: Property information and purpose of loan
For the second section of the mortgage application, you’ll need to be prepared with the details of the property, including the address, type of property (its legal description), the year it was built and the number of units if it’s a multi-unit property.
This section also asks the purpose of the loan (purchase, refinance, construction or construction to permanent) and whether the property will be a primary residence, secondary residence or an investment. Depending on the purpose of the loan, other information about the property may be required.
Finally, you’ll be asked to define who will hold the title and the source of the down payment.
Section III: Borrower information
This section is all about the borrower(s), who will need to be prepared with their legal name, Social Security number, phone number, date of birth, current address, years of school completed and marital status. If you have owned or rented at your current residence for less than two years, you will need to provide former residence information, as well.
Section IV: Employment information
Borrower(s) also need to provide information about their employment status, including the name, address and phone number of their employer (as well as whether they are self-employed), how many years they’ve been on job and in the profession, their position or title and the type of business. If you have been with your current employer for less than two years, there is additional information required about previous employment history.
Section V: Monthly income and combined housing expense information
This section evaluates the money the borrower(s) have coming in per month versus the money they have going out. You’ll need to fill in your monthly income, including your base income, bonuses, overtime, commissions, dividends and interest, rental income and any other income.
You’ll also need to fill in your monthly expenses — both current and proposed — including rent, first mortgage, other financing, hazard insurance, mortgage insurance, real estate taxes, HOA dues and any other fees associated with your residence. Note that self-employed borrowers may have to provide additional information.
Section VI: Assets and liabilities
In addition, you’ll need to provide information about your assets. These may include checking and savings accounts, stocks and bonds or a life insurance policy with cash value. (Account numbers and values are required.)
On the liabilities side, you’ll need to list any debt you carry, such as credit cards or a car loan, along with the respective amounts owed and monthly payments. Liabilities also include any child support or alimony payments, job-related expenses and anything else you may owe.
At the end of this section, you’ll add your liquid assets to any physical assets (cars, real estate, retirement funds, businesses owned) to arrive at your total assets, and add up all of the debts and expenses to total your liabilities.
Section VII: Details of 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 land price (if it’s being purchased separately), estimated prepaid items and closing costs, private mortgage insurance (PMI) and mortgage insurance premium (MIP), if applicable, and any discounts the borrower is paying.
Section VIII: Declarations
In this section, the borrower(s) must 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 had a property foreclosed in the last seven years?
- Are party to a lawsuit?
If the answer to any of the questions is yes, you’ll be asked to include an explanation at the end of the application.
Section IX: Acknowledgement and agreement
This signature section is legally binding. In it, the applicants verify that the information provided in the mortgage loan 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 is optional demographic information to be provided to government agencies. If you choose to participate, you’ll be asked to identify your race, gender and ethnicity so that the government can verify the lender’s compliance with fair housing laws.
Applying for a mortgage: Documents you’ll need to have
Before filling out the mortgage application, it’s smart to collect the documents and information you’ll need to complete it ahead of time, particularly if a mortgage lender is assisting you in person or by phone. Here are the documents you’ll want to have at the ready to satisfy your lender’s questions:
- One month of most recent pay stubs
- W-2s from previous two years
- Two months of most recent bank statements (along with account numbers)
- Tax returns
- Government-issued ID
- Addresses and phone numbers to verify residency and job history for past two years
- Addresses of real estate owned and statements for any outstanding debts
When you’re ready to apply for a mortgage, it’s crucial to get the best interest rate possible so you aren’t overpaying. Keep in mind that, while applying for a mortgage won’t be a huge detriment to your credit score, your score can have an impact on the interest rate you get.
“In most cases, applying for a mortgage will not hurt your credit score greatly,” Meier says. “The average is about a five-point reduction in your score for the inquiry. If you apply multiple times within a 30-day period, it only affects your score one time.”
When comparing interest rates, be sure to compare the whole loan offer and any fees, as well, which can affect your overall cost.
“Make sure to conduct a thorough search when rate shopping by calling banks or mortgage companies or searching online — you want to inquire if you will need to pay additional points or fees to receive the quoted rate,” Meier says. “You will also want to inquire on the lock period term.”
There are typically 30-, 45- and 60-day rate locks that guarantee your rate for the specified time. It’s important to make sure that the lock period is long enough to allow you to close on the property.
If you have questions about locking your rate, or about the application in general, consult with the loan officer to talk through any concerns.