What Is a Mortgage Application?

So, when you're looking to get a mortgage and buy a house, you gotta fill out this thing called a mortgage application. It's a bunch of paperwork that you give to the lender. They wanna know all about the property you wanna buy, your finances, and your work history. Basically, they use the info in the application to decide if they're gonna give you the loan or not.

KEY TAKEAWAYS

• You submit a mortgage application to a lender when you apply for a mortgage or purchase real estate.

• A mortgage application requires extensive information, including the property being considered for purchase, the borrower’s financial situation and employment history, and more.

• Lenders use the information in the application to decide whether or not to approve the loan.

• One of the most common mortgage applications is the 1003 mortgage application form, also known as the Uniform Residential Loan Application.

• The Federal Housing Finance Agency (FHFA) has put in place more flexible lending and appraisal standards for mortgages backed by Fannie Mae and Freddie Mac to make sure that homebuyers can close on loans during the recent economic crisis.

Understanding a Mortgage Application

Once you've agreed to buy a specific property, your lender will start the mortgage application process. The application will ask for a bunch of information about your finances, so it's a good idea to gather all that stuff together before you apply.

You know how there are different types of mortgage applications that lenders use? Well, one of the most popular ones is the 1003 mortgage application form, also known as the Uniform Residential Loan Application. This form is used by most lenders across the United States because it's a standardized way to gather all the information they need to decide if someone is a good candidate for a mortgage.

There's this thing called the 1003 loan application form, right? It's from Fannie Mae, which is basically a big player in the mortgage game. And you know what? Fannie Mae and Freddie Mac are these lending companies that were made by Congress. Basically, they buy up mortgages and guarantee them.
Anyway, here's the deal. If you want Fannie Mae or Freddie Mac to consider buying your mortgage, you gotta use Form 1003 (or if you're dealing with Freddie Mac, it's called Form 65). It just makes things easier for lenders, you know? Instead of messing around with other forms and then having to transfer all that info onto a 1003 form later when they're ready to sell the mortgage, it's just simpler to use the right form from the start.

⚠️ WARNING Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, then there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau (CFPB) or the U.S. Department of Housing and Urban Development (HUD).

Mortgage Application Requirements

The information required on a typical mortgage application includes:

Borrower’s Information

• Borrower’s address, marital status, and dependents

• The type of credit being applied for, meaning whether it’s a joint or individual application

• Social Security number and date of birth

• Current employer and address, as well as employment income

When you apply for something, like a loan or a rental application, sometimes you have to include some extra papers to support your case. These papers can include things like bank statements and pay stubs. But if you work for yourself, you might have to show your tax returns from the last two years instead to prove how much money you make.

Financial Information

We basically want to know what stuff you've got that's worth some money, like any assets or things you own. We also want to know about any money you might owe or any other financial responsibilities you have.

• Assets include bank accounts, retirement accounts, certificates of deposit, savings 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

• Any real estate owned and its estimated value or rental income, if applicable

Mortgage Loan and Property

So, in this part, we'll talk about the house you're thinking of buying and all the nitty-gritty details about it.

• Address of the property

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

• Any rental income from the property, if you are buying the home as an investment with the goal of renting it out

Declarations

Hey there! In this part, we have a bunch of questions to figure out what you're planning to do with the property and to know about any other legal or financial stuff that might not be covered in the application.

• Will the home be your primary residence, or your second home?

• Are there any judgments, lawsuits, or liens against you?

• Do you have any past foreclosures, or are you a guarantor for another loan?

Acknowledge and Agree

So, in this section, you'll be signing the application. Basically, it's your way of saying that you believe all the information you've given is accurate and true.

When you fill out the mortgage application, the bank's underwriter takes a look at it. They basically verify and examine all the info you provided. Once they're done with that, they decide how much the bank is willing to loan you and what interest rate you'll be given.
If your application gets approved, the bank will send you a loan estimate. This document breaks down all the closing costs you'll have to deal with. After that, you'll receive a commitment letter. But here's the thing - when you get that commitment letter, you might have to pay a deposit to cover the cost of an appraisal. So keep that in mind!

Special Considerations

When you're applying for a mortgage, there's a whole process to go through. First things first, you gotta take a good hard look at your finances. The lenders, you know, the people who give out the loans, they want to see that your debt-to-income ratio is not more than 35%. And out of that debt, only 28% should be going towards your mortgage. Let me break it down for you. Say you make $85,000 a year. That means your housing expenses, which include your mortgage payment, home insurance, property taxes, and any condo fees, should not be more than $2,480 per month. Make sense?

If you're buying a home and your down payment is less than 20% of the purchase price, the lenders are gonna tack on an extra cost called private mortgage insurance (PMI). This is basically an insurance that protects the lender in case you can't pay off the loan. It's just an extra precaution they take, ya know?

⚡IMPORTANT Hey there! Just wanted to give you the heads up that Fannie Mae and Freddie Mac made some changes to their upfront fees on home loans in May 2023. Here's the gist: if you've got a credit score of 740 or higher, your fees will be bumped up a bit. On the flip side, if your credit score is below 640, your fees will actually be decreased.
But wait, there's more! Your down payment also plays a role in determining what your fees will be. The higher your down payment, the lower your fees, but remember, your credit score still factors into it. For more detailed info, you can hop on over to Fannie Mae's website and check out their Loan-Level Price Adjustments. Happy house hunting!

So, when you're thinking about buying a house, you gotta think about the size of your down payment. If you put down a smaller amount, your monthly mortgage payment is gonna be bigger. But here's the thing, if you can put down at least 20%, your monthly payment is gonna be less and you won't have to pay any monthly private mortgage insurance (PMI).
For conventional mortgages, they usually ask for a minimum of 5% down. But if you're going for a Federal Housing Administration (FHA) mortgage, they only require 3.5% down. And here's a bonus, when it comes to Veterans Affairs (VA) mortgages, you often don't even need to put anything down.

The next thing you'll want to do is reach out to a lender to get pre-qualified. What that means is they'll do a credit check to figure out how much money they can lend you. Once you have that pre-qualification letter, you can start looking for your dream home!

Lock In a Fixed-Rate Home Equity Loan

Just wanted to let you know that if you've seen an increase in your property's value, you might actually have a nice chunk of money sitting right under your nose. But here's the exciting part - you can tap into that home equity with a fixed-rate home equity loan!
With this loan, you'll receive a lump sum of cash at a fantastic rate, and the best part is that your monthly payments will stay consistent. No worries, you won't need to sell your home or make any changes to your existing mortgage.
To make things even better, LendingTree can help you compare multiple home equity lenders! In less than two minutes, you'll be able to find the best rate that suits your needs. So why wait? Start now and discover the amazing home equity offers waiting for you!