The New Uniform Residential Loan Application: What You Need to Know
Getting a mortgage starts with filling out a loan application. It’s not exciting, but it’s a necessary and important step in your homebuying journey.
The mortgage application that borrowers and lenders have been familiar with for more than two decades is getting a face-lift. The changes stem from updated federal government regulations put in place to ensure the mortgage lending data illustrates whether lenders are effectively serving their communities. They also help identify — or rule out — discriminatory lending practices.
Here’s what you need to know about the new and improved Uniform Residential Loan Application.
What is the Uniform Residential Loan Application?
Your mortgage application helps your lender assess whether you’re eligible to borrow money from them to buy the home you’re after. The form is several pages long and crammed with fields asking about your income and the property you want to buy.
The Uniform Residential Loan Application (URLA) is the standard document that homebuyers fill out when applying for a mortgage. It’s published jointly by the government-sponsored enterprises, Fannie Mae and Freddie Mac, and is used in all states and U.S. territories. It’s also referred to as Form 1003 for Fannie Mae and Form 65 for Freddie Mac.
The application asks for several pieces of information, including:
- The type of mortgage you’re applying for.
- The purpose of the mortgage.
- Details about the property the mortgage would buy.
- Details about the mortgage transaction, including loan amount and mortgage insurance costs.
- Your employment and income information.
- Details about your assets, liabilities and legal declarations.
- Your demographic information.
The older form has 10 sections in total, but forthcoming changes will shorten the form to eight sections.
Why is the URLA changing?
Back in 2015, the Consumer Financial Protection Bureau issued an amendment to the Home Mortgage Disclosure Act (HMDA) that changed the data that mortgage lenders were required to collect from borrowers for reporting purposes. The overall purpose of HMDA is to require financial institutions to collect, report and disclose their mortgage lending activities, according to the bureau. This information helps the public by:
- Showing whether these institutions are serving the housing needs of their communities.
- Assisting public officials with making decisions and policies.
- Identifying potentially discriminatory practices and assisting with the enforcement of anti-discrimination laws.
The new HMDA rule calls for the addition of 25 new pieces of borrower data and the revision of 20 out of the 23 existing data fields, according to the Mortgage Bankers Association (MBA). Here’s a sampling of the new data fields:
- Borrower-paid origination charges
- Combined loan-to-value ratio
- Credit score
- Debt-to-income ratio
- Discount points
- Interest rate
- Lender credits
The effective date for those changes was Jan. 1, 2018.
The URLA has been updated to ensure the information collected from borrowers meets the revised HMDA requirements, including the collection of information on gender, race and ethnicity, the MBA said.
The new mortgage application has also been revised to separate the information required from borrowers and the information lenders must complete. Additionally, the language used throughout the form has been updated for clarity, and the overall form has been redesigned to follow a format similar to the Loan Estimate and Closing Disclosure.
What homebuyers should know about the new URLA
The redesigned URLA is intended to be more consumer-friendly, support accurate data collection and improve efficiency, according to Fannie Mae. The form can be filled out electronically but there’s also a paper version as well as a Spanish informational version.
Revisions to the application are result of a collaborative effort of input from mortgage lenders, technology solution providers, government housing agencies, housing advocates, mortgage insurance companies, mortgage trade associations and consumer groups.
The new URLA collects details that are meant to be helpful to the underwriting decision-making process. Although there are several changes to the physical form, the actual application process is expected to remain the same for both mortgage borrowers and lenders.
Mortgage lenders can start using the redesigned URLA in July 2019, but are required to implement it in February 2020. A transition period will be in effect from February 2020 until February 2021, during which older URLA forms will still be accepted under certain circumstances. After that point, the old application won’t be accepted.
The bottom line
The Uniform Residential Loan Application is getting a more modern look and streamlined functionality, but the core of the information borrowers are required to provide isn’t drastically changing.
Take the time to gather the documents you’ll need in order to complete your mortgage application, including your bank statements, pay stubs, investment and retirement account statements, tax returns and W-2s.
For more on the homebuying process, read LendingTree’s guide on how to apply for a mortgage.