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The New Uniform Residential Loan Application Basics

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The first step to applying for a mortgage is to complete a mortgage application. In lending language, it’s called a Uniform Residential Loan Application, URLA or 1003 application. You’ll need to know how to navigate major changes on the redesigned 1003 form to get a home loan in 2021.

What is a uniform residential mortgage application?

The Uniform Residential Loan Application is used by lenders to determine your creditworthiness for a home loan. It’s known within the mortgage industry as Fannie Mae Form 1003, and borrowers enter income, asset credit and other personal financial information into the redesigned form’s nine sections.

What’s new on the 2021 uniform residential mortgage application

The new 1003 provides jargon-free explanations of the information needed in each section. The extra detail in the questions allows lenders to give you a more accurate approval once your application data is run through the automated underwriting systems (AUS) they use to approve mortgage loans.

New features and sections on the revised 1003 form include:

A gifts and grants section. Section 4d lets you list the source of a gift, the amount you’re getting and even whether the gift is already deposited into your bank account.

A rental income section for the home you’re buying. Section 4c comes in handy if you’re buying a two- to four-unit home and living in one unit. You can qualify with the rents on the rented units, and, with an FHA loan, you can become both a homeowner and a landlord with only 3.5% down.

A section to add any piggyback financing information. Buyers taking out a first and second mortgage like a home equity line of credit or home equity loan can add the HELOC or HEL information in section 4b. Also called a piggyback or 80-10-10 loan, savvy homeowners can avoid paying mortgage insurance by combining a first and second mortgage with a 10% down payment to buy a home.

A section just for military borrowers. Section 7 provides lenders with information about your military service (or that of a deceased military spouse) if you’re eligible for a VA home loan.

The nine sections of the new 1003 application form

The new 1003 form was created to make it easier for borrowers to apply for a home loan. It also gives lenders more information to help them make a more accurate approval decision. Borrowers used to the old Uniform Residential Loan Application will notice one big change right away: no more Roman numerals. Sections I to X are replaced with Sections 1 to 4, with multiple subsections in between.

Here’s a breakdown of what each section of the 1003 asks for (the sections highlighted in green below are new, and later we’ll provide some extra details about them):

Section 1: Borrower Information

This section asks for personal information, including employment, income and past addresses.

Section 1a is all about personal details, including:

  • Your name, social security number, date of birth and citizenship status
  • Whether you’re applying by yourself or with someone else
  • Your marital status and how many dependents you have
  • Contact information including cellphone, work phone and email address
  • Your current address and prior address, if you’ve lived at your current address for fewer than two years

Section 1b and 1c gather employment and income details including:

  • Current employer information, including contact numbers and start date
  • Details about any self-employment
  • Whether you’re employed by a family member or party to the mortgage transaction
  • Your current and prior monthly income

Section 1d only applies to borrowers with less than two years in their current position.

Section 1e gives you a place to add any other types of income you receive, including:

  • Alimony
  • Child support
  • Disability
  • Public assistance
  • Unemployment benefits
  • Income sources that aren’t listed on the form

Section 2: Financial Information — Assets and Liabilities

You’ll detail bank account balances, assets you own and money you owe, along with the related monthly payments, in this section. Lenders use this section to determine if you have enough money for the down payment and closing costs, and enough income to cover the new mortgage payment plus any debt you already pay.

Section 2a is where you’ll list cash-value assets such as:

  • Checking, savings and money market accounts
  • Mutual funds
  • Stock
  • Retirement accounts, such as 401ks

Section 2b covers assets that you plan to convert to cash or use toward your purchase, such as:

  • Profit from the sale of a current home
  • Funds you received from the sale of an asset, such as a car
  • Earnest money you pay as part of an accepted purchase contract
  • Relocation funds from your employer
  • Special down payment options, like sweat equity

Section 2c details standard debts that usually appear on your credit report, including:

  • Credit cards and other revolving debt
  • Installment financing, such as car or student loans

Section 2d breaks out any other monthly debt obligations like:

  • Alimony or child support you pay
  • Job-related expenses

Section 3: Financial Information — Real Estate

List any real estate you own and provide information about any mortgages you pay in this section.

Section 3a to 3c outlines the specifics of other homes you own, including:

  • Monthly rent received
  • Monthly payments, including property taxes, insurance and homeowners association fees
  • How much the home is worth
  • The balance of any current mortgages

Section 4: Loan and Property Information

This section asks why you’re applying for the loan and for details about the home you’re buying or refinancing.

Section 4a is where you add information about:

  • How much you want to borrow
  • The purpose of the loan
  • The address of the home, the number of units and the estimated home value
  • Whether you intend to live in the home, rent it out or use it as a second home
  • Whether the home can be used as both a residence and a business (mixed-use)
  • Whether you’re financing a manufactured home

Section 4b details any additional financing you’re taking out along with the mortgage you’re applying for (like a home equity line of credit (HELOC) or a home equity loan).Section 4c is for rental income that’s expected to be received on the home you’re buying, such as a multi-family home that you plan to live in.

Section 4d is specifically for information about gifts or grants you’ve received or will receive for the loan. They include gifts or grants from:

  • Your relative
  • Your employer
  • A nonprofit or a local, state or federal government agency
  • An unmarried partner

Section 5: Declarations

This section features 1003 declarations questions about the home being financed, funds for the loan and past financial history.

Section 5a digs a little deeper into the home you’re buying and the money you’re using, including:

  • Details about homes you’ve owned in the past
  • Whether you’re related to the seller of the home you’re buying
  • Information about any other loans you’re applying for
  • If there will be any other loans on the home

Section 5b asks you specific questions about your credit history to make sure you disclose details about:

  • Past bankruptcies, judgments and foreclosures
  • Lawsuits you’re involved in
  • Any delinquent federal debt
  • Cosigned loans

Section 6: Acknowledgments and Agreements

This section of the URLA features pre-printed legal language basically stating that:

  • You’ve provided accurate information and understand the penalties if you don’t
  • The loan will be secured by the home you’re buying or refinancing
  • The lender will order a home appraisal to verify the home’s value
  • Electronic records may be kept of all the records related to your loan
  • You understand lenders could report any late payments to credit bureaus
  • You can contact a HUD-approved counselor for advice if you have trouble making your mortgage payments
  • You authorize the lender to use your information and share it with other parties to approve your loan

Section 7: Military Service

Lenders approved to make loans backed by the U.S. Department of Veterans Affairs (VA) gather information in this section about current or prior service of a military borrower or their surviving spouse.

Section 8: Demographic Information

Lenders must request and provide information about your ethnicity, sex and race under the Home Mortgage Disclosure Act (HMDA) so regulators can identify and prevent patterns of lending discrimination. However, you don’t have to answer the questions.

Section 9: Loan Originator Information

Your loan originator will fill this information with details about the mortgage company, licensing and contact information.

 

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