Most of the mortgage lenders and brokers use the uniform residential loan application to collect the required data from potential home purchasers. Many lenders use the standardize document.
Some vendors may help you fill out this form while others may expect you to do it yourself. Whoever fills out the form for you you need to ensure that the information on the form is correct and accurate.
Ultimately it is you who is responsible for the truthfulness of the application since you are the one who is going to be signing on it.
Main sections of the uniform residential loan application
1) Type of mortgage and term of loan
The first section of this form contains information about the mortgage terms and conditions. The amount being borrowed, the interest rate, the term of the mortgage and the type of the mortgage (ARM/FRM) get a mention here.
If you are unsure of these points at the time of filling out the form you can leave them blank and the lender will fill them out for you. Your mortgage lender or broker will complete the agency case number.
2) Property information and purpose of loan
Mortgage lenders will want to know the nature of the property being purchased. They would also want to know why you are borrowing the money. In this section you provide the address and the description of the property, which simply means the block, and lot number of the property.
This information can be found on the preliminary title report, which you your real estate agent and your mortgage lender should have. This is given to you soon after you have signed a purchase agreement if you’re buying a property.
For refinance situation the lender already has access to this information.
The information that you include in the purpose of loan section indicates to the lender whether you are planning to use the mortgage to buy a home, refinance existing home or constructing a home. The lender will also want to know whether the property you are buying is your primary or a second residence or you are buying it for investment purpose.
The purpose you cite for taking the loan will effect the terms and conditions as well.
The mortgage lender usually considers loans given out for investment properties to be riskier than primary residences because they are presumed to be less important to a homeowner than his primary residence.
For this reason the interest-rate on second residences and investment properties is higher.
You may be tempted and might even be advised by your broker and other people to lie on this aspect of your application. However, you should be aware that you can easily get caught if you falsify information.
Even after closing on loan purchase the loan lenders can ask for proof such as a copy of the utility billing in your name to prove that you are living in the property. Lenders have even been known to send a representative to the house to see who is living in the property.
When you plan for the mortgage you must declare the way you hold the title to the property as a single owner, joint holder or joint tenant and so forth.
The lender will also want to know the source of the money from which you are making the down payment. Lenders are most comfortable if this payment comes from your personal financial resources. If the money has been borrowed, it is liable to increase the burden of debt and interfere with your ability to pay the mortgage loan in the future.
In this section as well you are best off telling the truth because lenders always ask for bank account statements for the past few months as well as investment account statements.
Any money borrowed from relatives and friends will show up. If you are receiving money from a relative as a gift to be used for down payment, have them write a short note for the broker. The lenders provide a standardized gift letter format confirming that the money is a gift and does not have to be re-paid.
In spite of this letter the lenders are suspicious about such payments.
3) Borrower information
This section of the loan application will require you to provide personal details about yourself as well as any person cosigning with you on your loan application.
Years of education gets a mention. If you graduated from high school you have 12 years of schooling. 2 to 4 years of college education can be added to that. This information usually does not affect the lender’s decision to give or not give you the loan.
Lender also wants to know the address of the 2 prior residences you have recently stayed in. If you have been in your recent residence for the past two years you will not need to list your two prior residences. Lenders are looking for stability here.
Lenders will request a letter from a landlord to verify that you’ve paid your rent in a timely fashion. If you have moved recently lenders may also check the previous landlords. If you have made your payments in time you should be all right but if you haven’t you can explain yourself either by separate letter or in the blank space on page 3 or 4 of the application.
4) Employment information
Your employment history is an important factor in your mortgage application. Unless you’re independently wealthy, your employment history and your income will determine your ability to meet the payment obligation of the mortgage. Lenders are looking at candidates who can show stability with the job and future income.
If you have held your job for at least two years that his only position that you need to mention. If you work more than one job, you need to mention each one separately. If there have been more than one employers in the past two years you should list them as well.
Mortgage lenders are aware of the fact that in the current economic scenario many people change jobs. You might want to avoid showing many changes to make your application look good. If you have a job for a very short period of time you might want to avoid mentioning that on the mortgage application. You may also be tempted to cover a gap in employment because you want your application to look positive.
While it is not necessary to list every single employment position out in this section, you should be aware that your mortgage lenders will check the informations with your previous employers. It is usually better to disclose employment job changes in your application rather than have the mortgage lender discover it himself.
The lenders usually don’t mind some job-hopping. If they see frequent job changes, they might ask that you current lender fill out the ‘prospects for continued employment’ section of the ‘verification of employment request’.
This section also asks the applicant to list off their monthly income from prior jobs. You do not provide a monthly income from your current job here because it’s provided in the next section of the application.
You may also wonder why you are required to provide your current employers contact details. Shortly before your loan is ready to close the lender may call your current employer to verify that you’re still employed but the verification of employment is usually done through the current pay stubs and W-2s.
It is highly unlikely that the lender will call any of your previous employers unless he needs to verify some employment information on your application.
5) Monthly income and housing expense projections
Section 5 of this application determines the fate of most mortgage applications. Here you list your monthly income including your amount derived from investment such as bank, stock and mutual fund account as well as any bonus or commissions.
Most people’s employment income determines ability to borrow. If your income differs from month to month simply enter your average monthly income for the past 12 months. Some vendors use a 24 month average if you are self-employed.
6) Rental Income
Rental property is property that you bought for the purpose of renting it out. If you have other income sources such as child support or alimony should list them on the other line and describe them in this section. The more income you show the more likely you are to qualify for the mortgage.
7) Assets and liabilities
In this section you present your personal balance sheet which summarizes your assets and liabilities. The assets are subdivided into liquid assets and non-liquid such as real estate. Liabilities are any loans of debts that you have outstanding. The more of these obligations the more unwilling mortgage lenders may be to lend you a large sum of money.
It is a good idea to reduce your debt to income ratio before you apply for a mortgage. If you can pay off your high consumer debts such as credit card and automobile loans, you should consider doing that now. These debts usually carry high interest rate and can hurt your chances for qualifying for a mortgage.
8) Details of transactions
In this section you will detail the terms of the proposed home purchase or refinance. The purpose of the first part of this section is to calculate the cost of the home, including closing costs. After you subtract the expected loan amount, this column shows you the amount of money you need to come up with to close on the home purchase.
This section contains some of the questions the lender needs to ask. If you say yes to any of these questions you can explain yourself on a separate page or in the blanks page on page 4 of the application. Just because you answer yes to any of the questions it does not mean your application will immediately get denied.
10) Acknowledgment and agreement
This is the section where you cross check and confirm that the information provided by you is true and accurate. If you haven’t been completely honest on your mortgage loan application this is your last chance to rethink and correct what you are doing.
If you have had someone else fill out the form for you, you need to make sure that the answers are correct before you sign the agreement. Now is the time to question yourself and ensure that you presented your information in the truthful light.
11) Information for government purposes
You may skip this section since it’s optional. It is used to track discrimination practices by the lender and to see if the lender does in fact discriminate on the basis of race, ethnicity and other non-financial factors.
12) Continuation Sheet (Page 3)
On the continuation sheet on page 3 of the uniform residential loan application you will find largely an empty blank page. This is for giving additional information that could not fit anywhere else in the mortgage application form.
This is where you explain the blemishes on your credit report, reasons for job changes etc. If you don’t have anything to put on this page for you should draw a line across it so that the lender knows you have nothing to say. Be sure to sign on the bottom of this page as well even if you do not write anything on it.