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The

Uniform Residential

Loan Application

Understanding The 1003

By Kevin Panet

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The 1003

Table of Contents

Learning Objectives 3

Overview 4

Section I. Type of Mortgage and Terms of Loan 5

Section II. Property Information and Purpose of Loan 6

Section III. Borrower Information 7

Section IV. Employment Information 8

Section V. Monthly Income and Combined Housing 9

Expense Information

Section VI. Assets and Liabilities 12

Section VII. Details of Transaction 14

Section VIII. Declarations 16

IX. Acknowledgement and Agreement 18

X. Information For Government Monitoring Purposes 18

Continuation Sheet/Residential Loan Application 19

Sample 1003 20

Summary 24

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The 1003

Learning Objectives:

By the end of this training, you will:

Understand the importance of the 1003

Ascertain basic borrower information

Evaluate employment information.

Determine monthly income and housing expenses

Review Assets and Liabilities

Understand the details of the transaction

Review Declarations

Understand the agreement

Collect HMDA information

Form a conclusion regarding the information provide that will lead to an

appropriate underwriting decision.

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The 1003

Overview

The first step in determining whether an applicant is able to qualify for a loan is the

completed of the Uniform Residential Loan Application, commonly known in the

industry as the 1003. This requires the broker to collect a lot of very personal and

private information. This information must be protected at all times to maintain the

integrity of the loan process.

Generally, the broker or loan officer will help the applicant(s) to complete the 1003.

Applications are usually done first with pen, then the information is entered into a

Loan Origination System (LOS) by a processor. In some cases, the broker or loan

officer might enter the information directly into the computer.

In this section of the course, we will look at the 1003, section-by-section, pointing out

key issues and concerns.

Borrower Signatures:

Before the loan application is begun, its important to know who is actually applying

for the loan. In community property states, only one spouse is required to fill out the

initial application.

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The 1003

Section I. Type of Mortgage and Terms of Loan

In this section, the broker will record the type of loan, loan amount, proposed interest

rate and Amortization type. For example:

Mortgage Applied for: For loans submitted to Ownit Mortgage, you can expect to see

the boxed marked other to be checked. If other boxes are checked, then the broker

might be shopping the loan with other lenders.

At Ownit Mortgage, we do not use the Agency Case Number or Lender Case

Number boxes.

Amount: This is for the total estimated amount of the loan, including all fees.

Interest Rate: During the initial loan application period, the broker usually gives only

an estimate of what the final interest rate might be. Interest rates are dependent

upon a variety of factors and it would be premature to quote a final rate at this point.

Number of Months: This is the term of the loan. For a 30-year loan, the number

would be 360. For a 15-year loan, the number would be 180. For a 40-year loan due

in 30 years, the broker might still put 360 months.

Amortization Type: This box will be marked either Fixed Rate or ARM. We do not

do Graduated Payment Mortgages (GPM) at Ownit.

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The 1003

Section II. Property Information and Purpose of Loan

Subject Property: This is either the address of the new home that will be purchased or the

current address of the home that will be re-financed.

Legal Description of Subject Property: This is the lot and track numbers that appear on

Title.

Purpose of Loan: Determines type of loan being requested.

Property will be: This establishes residency.

If a Construction or construction-permanent loan: Complete as necessary.

If a Refinance Loan: Fill in the blanks for Year Acquired, Original Cost (when

acquired), Amount of Existing Liens (money still owed), Present value of Lot (current

market value of property), Cost of Improvements (complete if improvements are to be

made, adding to market value), and finally, Total (a+b).

Title will be held in what Name(s): Generally, this is the borrower and co-borrower (if

applicable). It is possible for someone to be on title, but not on the loan. However, if they

are on the loan, they must be on the title.

Manner in which Title will be held: This is for vesting purposes and can be as Joint

tenants, tenants in common, etc.

Source of Down Payment, Settlement Charges, and/or Subordinate Financing (explain):

Fill in as necessary.

Estate will be held in: Mark either Fee Simple (most cases) or Leasehold.

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The 1003

Section III. Borrower Information

In this section, the broker will begin to record information for the borrower and co-

borrower (if applicable). This includes:

Borrowers Name: This is the borrowers full legal name (including Jr. or Sr.

applicable).

Social Security Number: Must be a valid Social Security number. The lender will

check to make sure the number is valid. If the SSN starts with either a 7, 8 or 9, it

may not be a valid SSN for lending purposes. The broker may ask the borrower for a

copy of their SSN card as part of the pre-qualifying process to ensure the borrower

has a legitimate SSN.

Home Phone: This is a number where the borrower can be reached. It is OK to usea cell phone number if a home phone is not available.

DOB (mm/dd/yyyy): Date of Birth. Borrowers must be at least 18.

Yrs. School: Often this is checked by the broker to ensure the years of schooling is

consistent with the level of employment.

Marital Status & Dependents: Self Explanatory.

Present Address: Location where the borrower lives, whether they own or rent, and

how long they have been there.

Mailing Address: If different from present address.

If residing at present address for less than two years: If this is the case, the

applicant must state their previous address.

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The 1003

Section IV. Employment Information

In this section, the broker will begin to record employment information. This includes:

Name and Address of Employers: This should be the same name that appears on

the employees pay stub (if the employee gets a W-2) or the name of the business

that the borrower owns (if the borrower is self employed). If the borrower is self-

employed, then the Self Employed box must be checked.

Lenders will always check to confirm employment status.

The Employment information should be consistent with employment

information contained in the borrowers credit report.

Yrs. On this job: Lenders look for at least two years of employment history.

If the borrower or co-borrower was a full time student, it is OK to state this.

If the co-borrower is a non-working spouse, it is OK to say homemaker.

Yrs. employed in this line of work/profession: Lenders look for consistency either in

the job or in the profession.

Position/Type of Business: This must be accurate and truthful. Lenders will confirmthis and the loan may be denied if there is a false claim of employment.

If employed in current position for less than two years: If this is the case, the

broker should annotate what the applicant was doing, even if they were a student.

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The 1003

Section IV. Employment Information (Contd)

In this section, the broker will continue to record employment information (ifapplicable). This includes:

This section differs slightly from the previous section. The primary difference is the

box for Monthly Income. Remember, this is for the previous, not current

employment situation. Current employment information is captured in Section V.

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The 1003

Section V. Monthly Income and Combined Housing Expense Information

This section must be completely filled out. It is important that ALL income isdocumented. Additionally, its not enough to merely estimate Proposed monthly

housing expenses. Present expenses must also be included. Many lenders require

this to determine the impact of payment shock.

Gross Monthly Income:

Base Employment Income: This is the total, or gross amount the borrower

makes each month.

Overtime: This is the amount of income the borrower receives consistently, or

at least seasonably.

Commissions: This income is usually associated with individuals who are in

sales. This is money that they would receive on top of their base pay (if

applicable).

Dividends/Interest: This is income that comes consistently from stocks, bonds

or other investments.

Net Rental Income: If the borrower owns rental properties, and if those

properties are producing a net income, that income should be listed here.

Other: If there is other income, it needs to be described in the space provided

below. Page 5 of the application can be used if the borrower runs out of room.

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The 1003

Section V. Monthly Income and Combined Housing Expense Information

Combined Monthly Housing Expense:

Rent: If the borrower is currently renting, enter the amount paid (excluding

utilities and other expenses.

First Mortgage (P&I): Enter the amount (principle and interest) the borrower is

currently paying (if they currently have a mortgage) and the proposed monthly

payment.

Other Financing: Enter any additional financing, including a second mortgage.

Hazard Insurance: Borrowers must have enough insurance coverage for the

amount of the loan.

Real Estate Taxes: Normally paid once or twice a year, but must be broken

out monthly.

Mortgage Insurance: Generally required by conforming/conventional lenders

when loan is 80% or more of the appraised value of the property. Ownit does

not require MI on any of their loans.

Homeowner Assn. Dues: Must be considered if the property is subject toCC&Rs (Covenants, Conditions , and Restrictions).

Other: If applicable.

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The 1003

Section VI. Assets and Liabilities

It is critical that this section is filled out correctly. Any missing or falsified informationmay be result in the loan being denied by the lender.

Purchases:

If this is a purchase, the lender will want to see that there are assets available

to help the borrower make loan payments, should something unfortunate

occur.

Assets will usually be verified by the lender. At Ownit, we will verify assets,

even on NIV (No Income Verification) loans.

Refinances:

If this is a refinance, the lender will need to know what debts (if any) will be

paid off as a result of the transaction.

Accounts to be paid off are to be annotated by an asterisk (*).

Most boxes in this section are self-explanatory.

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The 1003

Section VII. Details of Transaction

a. Purchase price: The sales price of the home (for purchase transactions).

b. Alterations, improvements or repairs: Additional costs, usually to fix last-minute

issues with the house.

c. Land (if acquired separately): Any additional costs associated with land.

e. Estimated pre-paid items: Items that are not covered in closing costs.

f. Estimated Closing Costs: These may include appraisal, credit, escrow and other

costs associated with the loan.

g. PMI, MIP, Funding Fee: Private Mortgage Insurance (PMI), Mortgage Insurance

Premium (MIP) and/or a fee for funding the loan.

h. Discount (if Borrower will pay): This is the amount of money the borrower will pay

to lower their rate.

i. Total costs (add items a through h): This is the total cost of the loan transaction.

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The 1003

Section VII. Details of Transaction (Continued on Page 4 of 5)

j. Subordinate financing: This is the amount of additional financing that may beneeded for the full loan amount.

k. Borrowers closing costs paid by Seller: This is an amount the seller might be

willing to pay to help the borrower who is purchasing a house.

l. Other Credits (explain): This could be other credit extended to the borrower.

m. Loan amount (exclude PMI, MIP, Funding Fee): This is the loan amount, minus

PMI, MIP and FF).

n. PMI, MIP, Funding Fee financed: If not paid at closing, this is the amount that will

be financed as part of the loan.

o. Loan amount (add m & n): This is the total loan amount.

p. Cash from/to Borrower (subtract j, k, l & o from i): This will be the amount either

going to or from the borrower.

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The 1003

Section VIII. Declarations

a. Are there any outstanding judgments against you?: This question is asked todetermine if additional debts need to be considered in the Debt-to-Income (DTI)

calculations.

b. Have you declared bankrupt within the past 7 years?: This question is more

relevant for prime lenders. At Ownit, we are generally not concerned about a

bankruptcy (BK) if it is seasoned over 24 months, based on the discharge date.

c. Have you had property foreclosed upon or given title or deed in lieu thereof in the

last 7 years?: At Ownit, there will be no impact on events occurring 36 months or

more in the past.

d. Are you party to a lawsuit?: This questions seeks to understand if there is any

legal action that may have an adverse affect on the loan.

e. Have you directly or indirectly been obligated on any loan which resulted in

foreclosure, transfer of title in lieu of foreclosure, or judgment?: This questions seeks

to understand if the borrower is involved in any other loan transactions that have

experienced difficulties and might have a negative impact on the current loan

application. Note: You may or may not see evidence of this in the applicants credit

report.

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The 1003

Section VIII. Declarations (Continued on Page 4 of 5)

f. Are you presently delinquent or in default.?: This information will generally showup on the applicants credit report.

g. Are you obligated to pay alimony, child support , or separate maintenance?: This

must be disclosed and considered along with other debts.

h. Is there any part of the down payment borrowed?: If so, this must be considered

along with other debts. It may or may not show up on the credit report.

i. Are you a co-maker or endorser on a note?: Seeks to establish of the applicant is

a co-borrower on another loan.

j. Are you a U.S. citizen?: Certain restrictions may apply for non-U.S. citizens.

k. Are you a permanent resident alien?: Generally this applicant will have a 10-year

expiration date stamped on their Alien Registration Receipt Card I-551, also referred

to as a green card.

l. Do you intend to occupy the property as your primary residence?: Usually, higher

interest rates will be charged if the property is non-owner occupied.

m. Have you had an ownership interest in a property in the last three years: Thisgives the loan officer a better understanding of the applicants prior mortgage

experience.

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The 1003

IX. Acknowledgement and Agreement

The borrower and co-borrower are required to read the acknowledgement and sign

their full legal signature.You should take the time to read this section carefully and make sure you

understand every word of it.

Brokers/Loan Officers must be able to explain all 11 points if questions are

asked.

X. Information For Government Monitoring Purposes

This information must be collected for HMDA (Home Mortgage Disclosure Act)purposes, unless the borrower chooses not to furnish the information.

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The 1003

Continuation Sheet/Residential Loan Application

In this section, the borrower will submit any additional information that is required forloan purposes.

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Sample 1003

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Sample 1003

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Sample 1003

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Sample 1003

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Summary

Remember the following:

Filling out the 1003 is usually the first step in the loan process.

It is impossible to effectively underwrite a file without a completed 1003.

The more information provided on the 1003, the faster the loan will be funded.

The more accurate the information is, the better chance the loan will be

approved.

1003s will be review for red flags that may indicate material

misrepresentation. If there is any false information entered into the 1003, it

may be grounds for loan denial.