When you apply for a mortgage to buy real estate, one of the documents you will need to submit to the lender is called a mortgage application. The application is very detailed and includes information about the prospective buyer's employment history and financial situation, as well as additional details about the property that is being considered for purchase. When deciding whether or not to grant a mortgage loan, lenders look to the information provided in the applicant's loan application.

What Is a Mortgage Application

When you purchase real estate or apply for a mortgage from a lender, you are required to fill out an application for a mortgage. An application for a mortgage needs a lot of information, including the borrower's employment history and financial situation, the employment history of the property that is being considered for purchase, and other information.

When considering whether or not to grant the loan, lenders base their decision on the information provided in the application. The 1003 mortgage application form, which is also known as the Uniform Residential Loan Application, is one of the most common types of mortgage applications.  It is also one of the most comprehensive mortgage application forms.

For mortgages that are backed by Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) has implemented lending and appraisal standards that are more flexible in order to increase the likelihood that homebuyers will be able to successfully close on loans during the recent economic crisis.

Understanding a Mortgage Application

The application for a mortgage will be started by your lender as soon as you have an agreement in place to purchase a particular property. Because the application for the mortgage requests a substantial amount of information, it is in your best interest to compile all of your financial information before applying for the mortgage.

The 1003 mortgage application form is a standardized form that is used by the majority of lenders in the United States. Although there are several different versions of mortgage applications that are utilized by lenders, one of the most common is the 1003 mortgage application form. This form is also known as the “Uniform Residential Loan Application”. The 1003 form contains all of the information that a mortgage lender requires in order to determine whether or not a prospective borrower is worth the risk of the loan.

The Federal National Mortgage Association, also known as Fannie Mae, provides a loan application form with the number 1003. Congress established Fannie Mae and Freddie Mac (Federal Home Loan Mortgage Corp.) as lending enterprises to purchase and guarantee mortgages. These enterprises are Fannie Mae and Freddie Mac. Because both Fannie Mae and Freddie Mac require the use of Form 1003 or its equivalent, Form 65, for any mortgage that they consider for purchase, it is easier for lenders to use the appropriate form from the beginning rather than attempting to transfer information from a proprietary form to a 1003 form when it is time to sell the mortgage.

Mortgage Application Requirements

On a typical application for a mortgage, the following pieces of information are required:

Borrower’s information

Information about the borrower includes the borrower's address, marital status, and number of dependents.

• The type of credit that is being applied for, which indicates whether it is a joint or individual application;

• The applicant's date of birth (DOB) and Social Security number;

• The applicant's current employer and address; as well as employment income;

Along with the application, supplementary materials such as pay stubs and bank statements are frequently required to be supplied. If you are self-employed, you may be required to produce tax returns for the previous two years in order to provide evidence of your income.

Financial information

This section requests information regarding your assets, which can be anything you own that has a monetary value, as well as your debts and liabilities.

• Assets include bank accounts, savings accounts, certificates of deposit, retirement accounts, and brokerage accounts for stocks or bonds

• Liabilities include revolving credit, such as credit cards or store charge cards, and installment loans, such as student, car, and personal loans

• Assets include bank accounts, savings accounts, certificates of deposit, retirement accounts, and brokerage accounts for stocks or bonds

• Any real estate that is owned, as well as an estimate of its value and, if applicable, rental income

Mortgage loan and property

This section discusses the home that you intend to buy in its entirety, including the following information:

• The address of the property

 • The loan amount, as well as the type of loan, such as a purchase or a refinance.

• The amount of rental income generated by the property, if you are purchasing the home with the intention of renting it out after you have purchased it as an investment.

Declarations

This section includes a series of questions to evaluate your intent regarding how you intend to use the property and to disclose any other legal or financial matters that were not included in the application. The questions are organized in a way that allows you to answer them in the order that best suits you.

• Will this house serve as your primary residence, or will it be a vacation home for you and your family?

• Have you been the subject of any judgments, liens, or legal actions against you?

• Have you ever been foreclosed upon before, or are you currently serving as a guarantor for another loan?

Agree and Acknowledge

In this part of the application, you will put your signature, which is a statement to the effect that you believe the information that you have provided is accurate and truthful.

The information that was provided on the application for a mortgage will be verified and analyzed by the underwriter of the bank. The underwriter will then decide how much the bank will loan you and the interest rate that will be applied to the loan. After your mortgage application has been processed and approved, the bank will first send you an estimate of the loan amount, which will include information regarding the closing costs, and then they will send you a commitment letter. It is possible that at this time you will be required to make a payment toward the closing costs in order to cover the cost of an appraisal.

Special Considerations

The application for a mortgage is just one part of the larger process of applying for a loan. The borrower must first conduct an evaluation of their financial situation. Lenders would prefer to see a debt-to-income (DTI) ratio that is lower than or equal to 35%, with no more than 28% of that debt going toward the servicing of your mortgage. If you have an annual income of $85,000, for instance, you should not allow your housing costs to exceed $2,480 each and every month. The potential payment on a mortgage is only one component of the overall cost of housing; other potential costs include home insurance, property taxes, and condominium fees, if applicable.

If the borrower makes a down payment that is less than 20% of the home's purchase price, the lender will require the borrower to pay for private mortgage insurance, also known as PMI. The private mortgage insurance policy protects the lender in the event that the borrower is unable to repay the loan.

As a result of this, it is essential to give some thought to the total amount of the down payment you intend to make. The monthly mortgage payment will increase in proportion to the size of the down payment made. In contrast, if the borrower makes a down payment of at least 20% of the total loan amount, then not only will the monthly payment be lower, but there will also be no need for PMI payments. The minimum down payment required for a conventional mortgage is typically 5%, whereas the down payment required for a Federal Housing Administration (FHA) mortgage is only 3.5%. Mortgages offered by the Veterans Affairs (VA) typically call for no initial payment.

The next thing you need to do is talk to a lender about getting pre-qualified. This will involve the lender running a credit check, which will help them determine how much money they are willing to lend you. The moment you have the letter stating that you are pre-qualified for a mortgage, you are able to start looking for homes.