What You Should Know About Your Mortgage Loan Application

Now that you’ve read about the key professionals in the home buying process, it’s time to start taking a closer look at the forms and assorted paperwork necessary to purchase a home. There are a number of important steps involved in making the dream of home ownership a reality and one of them is completing your mortgage loan application (the official title for this form is the Uniform Residential Loan Application). This mortgage loan application includes several sections that capture information about you, your finances and details of your potential mortgage. It’s lengthy and at first glance seems complicated, so in this section you’ll learn about the reasons for each part of the form and why you’re being asked to provide the requested information. Your loan officer will help you fill out this form. Be sure to work with your loan officer to complete the application accurately and completely and take your time when answering the questions on the application. If you put false or inaccurate information on your mortgage application, it can seriously harm your chances of being approved and is illegal. All of the personal information on your application is confidential and protected by federal law.

A Section-by-Section Guide to Your Mortgage Loan Application

Section I:Type of Mortgage and Terms of Loan

The information in this section should match the type of mortgage and mortgage loan terms that you discussed with your loan officer. For purchases where you haven’t selected a property yet, you can specify the maximum amount you wish to borrow.

Section II: Property Information and Purpose of Loan 

If you’ve already selected a house, in this section you will need to provide information about the property, including the address, the year it was built, whether you want to purchase or refinance—as well as other details about the purpose of the mortgage loan you seek.

Section III: Borrower Information

This is personal information required of you and any co-borrower involved (any additional borrower who accepts responsibility for paying the mortgage, such as your husband or wife), including Social Security number, date of birth, marital status and contact information (street address and telephone numbers). If you have lived at your current address less than two years, be prepared to furnish former addresses for up to seven years. With this identifying information, your lender will be able to obtain your credit report, which is a key factor in helping your loan officer assess your current financial situation.

Section IV: Employment Information/ 

Section V: Monthly Income and Combined Housing Expense Information

In these sections, you need to provide a history of your employment (where you have worked and for how long), your monthly income and your monthly expenses (bills you pay every month)—along with recent paycheck stubs and federal W-2 income tax forms for the last two years. With this information, your loan officer can determine your ability to make regular payments on the mortgage and your capacity to afford the costs associated with owning a home. If you have not worked at your current job for at least two years, or if you have multiple jobs, you will need to provide information on all jobs going back until you have a two-year history. Your loan officer will have you sign a Verification of Employment (VOE) form, which will be sent to your employer to verify your employment and earnings. A VOE form will also be sent to previous employers if you have been on the job less than two years. Use your gross income for the

Section V: Monthly Income and Combined Housing Expense Information 

In these sections, you need to provide a history of your employment (where you have worked and for how long), your monthly income and your monthly expenses (bills you pay every month)—along with recent paycheck stubs and federal W-2 income tax forms for the last two years. With this information, your loan officer can determine your ability to make regular payments on the mortgage and your capacity to afford the costs associated with owning a home. If you have not worked at your current job for at least two years, or if you have multiple jobs, you will need to provide information on all jobs going back until you have a two-year history. Your loan officer will have you sign a Verification of Employment (VOE) form, which will be sent to your employer to verify your employment and earnings. A VOE form will also be sent to previous employers if you have been on the job less than two years. Use your gross income for the Monthly Income column in Section V. Your gross income is how much money you make before taxes or deductions. This includes most sources of income, although you aren’t required to disclose alimony, child support or separate maintenance payments if you do not choose to have  them considered for paying your mortgage. The information you provide will later be verified by a credit report ordered by your lender. Differences between your figures and those on the credit report will raise questions and may delay the decision on your mortgage loan, so it is important that you are as accurate as possible when filling out this section.

Section VI: Assets and Liabilities 

This section indicates your current financial position— how much you own (assets) versus how much you owe (liabilities). The difference between the two is your net worth. If you have bank accounts, savings, retirement funds, investments, cars or trucks—even cash that you keep at home—they can be considered assets that support your application. You will need to provide copies of all of your account statements for at least two months. For the Liabilities section, you will be asked to itemize all of your current bills, loans and other debts, including current balances and monthly payments. Debts include automobile loans, credit cards, finance company loans, bank and credit union loans and existing mortgages, including home equity loans. The assets and liabilities information you provide to your loan officer on the loan application will later be verified by a credit report ordered by the lender. If you have not yet established a credit record by obtaining a credit card or an auto loan, for example, your loan officer may look to see if you’ve paid your rent and utilities on time so they can evaluate your payment patterns.

Section VII: Details of the Transaction

This section gives the all-important details of the mortgage loan—presented as estimates—including the purchase price of your home, closing costs and the total cost of your mortgage loan (including principal, interest and fees), among other information. Your loan officer will complete this area of the application. Make sure that it agrees with your understanding of the transaction and look closely at the estimated closing costs.

Section VIII:Declarations

In this section, you will be asked to answer questions about any pending legal problems or other factors (past or present) that may influence your financial situation. For example, have you ever declared bankruptcy? This information, in combination with your credit report, will help your lender assess your ability to pay the mortgage. In addition, you will be asked to affirm if you are a U.S. citizen or a permanent resident alien. If you are not a U.S. citizen but can provide documentation to establish a legal presence in the U.S., you can still obtain a mortgage.

Section IX: Acknowledgment and Agreement

Your signature is your word of honor. In this section, you sign your name, saying that the information you are providing is accurate and true to the best of your knowledge.

Section X: Information for Government Monitoring Purposes

In this section of the application, you will need to provide such information as your ethnic origin and your race. That’s because the U.S. government wants to be sure our housing finance system meets the needs of every racial and ethnic group in the country. This is one way they gather the statistics they need to ensure the system works fairly for everyone.