Here is a line-by-line explanation of the Universal Residential Loan Application:
The two checkboxes in this paragraph are for borrowers who have a co-borrower who will either help pay for the home or who won't help pay for the home but has debts that will need to be considered in the loan application process. When using a co-borrower, be sure to have that person fill out all the relevant boxes throughout this form.
Loans come in many different types. FHA, VA and USDA are all backed by government guarantees that protect the lender. Conventional loans are not.
This is the total amount you'll need to borrow to buy the home.
You probably won't know the interest rate on your loan when you first apply. Your mortgage broker or lender will help with this section.
This is the time it will take to pay off the loan. For example, a 30-year loan will take 360 months to pay off.
This explains how the interest will be charged on your loan. A fixed-rate loan will have the same interest rate forever, while an adjustable-rate mortgage (ARM) will have an interest rate that periodically adjusts. A GPM is a graduated payment mortgage, which starts with a smaller payment that gradually increases over time. Be sure to discuss this with your lender and fully understand how much interest and principal is being covered under each situation.
If you're not sure of the property's legal description, the lender can get this information from the title report.
For most people filling out this application, the purpose will be "purchase" or "refinance." Construction loans cover situations where a new home is being built. If you are applying for a construction loan, your lender can explain which one best suits your situation.
A home is a primary residence if it's the home you will live in the majority of the time. A secondary residence could be a vacation home or other home you own in addition to your primary residence. An investment property is one that is rented out or resold for the purpose of making money.
If you are purchasing a home that is already built, you can leave this line blank. This is for people who are borrowing money to build a home.
Unless you are refinancing an existing loan, you can leave this line blank.
This is the name of the buyer or buyers.
There are many ways to hold title when you have more than one buyer.
Married couples or domestic partners usually hold title as Joint Tenancy, which generally gives each partner equal ownership and a right of survivorship – so if one owner dies, the property immediately belongs to the surviving owner, rather than the deceased owner’s interest counting as part of his or her estate and going to his or her heirs.
On the other hand, Tenants in Common pass their interests to their heirs and can, if it comes down to it, force a division of the property or a sale to extract their share. Ask a real estate attorney if you have questions about title and ownership so you can be sure you understand all the rights involved, which may vary somewhat by state.
Almost all homebuyers will check "Fee Simple" here, which gives them complete rights to the property. Leasehold ownership is a rare case when the borrower has rights to the property only for a specified period of time.
Write a short description of where you will get the funds for your down payment and closing. You need to briefly explain whether you'll take money from savings, sell stocks or receive a gift from relatives, for example.
Subordinate financing means taking a loan from a third party to cover these expenses.
This is where the borrower gives personal information such as Social Security number, date of birth, current address, etc.
This is where the co-borrower gives personal information such as Social Security number, date of birth, current address, etc.
The lender needs to understand your employment situation because it's an indicator of your ability to repay.
The lender needs to understand your co-borrower's employment situation as it's also an indicator of ability to repay.
If you've been with your current employer for less than two years or are currently working more than one job, you'll need to provide additional information in the boxes at the top of page 2.
If you've been employed at your current job for less than two years, fill out this section. Or if you're currently working more than one job, fill out this section about your other job(s).
In this section, you'll provide information about your monthly income, as well as your co-borrower's.
In this section, you'll provide information about your current housing expenses, as well as your estimated expenses on the home you want to purchase. This will help the lender determine whether your income can handle the purchase.
This space is for any income you included in the "other" category above. Note that you don't need to include alimony, child support or separate maintenance income if either borrower doesn't choose to have it considered for repaying the loan.
Use this section to list assets and liabilities of all borrowers and co-borrowers. If some of these items are shared – as is common for married couples – they can be listed as one.
Use the sections below to list your assets and their values. Assets may be held in cash, stocks, bonds, real estate, retirement funds, businesses owned, etc. There is additional space to list assets on page 3.
Use the spaces below to list the cash or market value of each asset described.
Enter the name of the company or individual holding your cash deposit for this home purchase. This might be your title company, escrow company, real estate brokerage or attorney.
This is the total dollar amount of your cash deposit, not the dollar value of assets.
You'll also include information for you and your co-borrower's savings and checking accounts in the section below.
Use this section to list any debts or liabilities on which you and/or your co-borrower owe money. Include credit cards, car loans, student loans, mortgages, alimony, child support, etc. If you need more space, use page 5 of the loan application to list additional liabilities.
Use this column to continue listing assets from page 2.
Use this column to continue listing liabilities from page 2.
Liquid assets are cash or those assets that can easily be converted to cash. Add up the total of these assets here. Lenders care especially about liquid assets, because they are what you'd likely use to pay off debt.
This is the total for all your assets, including liquid (cash or easily converted to cash) and non-liquid, which require more time and effort to convert to cash.
This is the total of your monthly debts paid each month, including credit cards, loans, family support and work-related expenses.
This is the total outstanding balance of your debts (not monthly), including credit cards, loans, existing mortgages or lines of credit. It doesn't include family support or job-related expenses, because there's no way to calculate a balance for those.
You can see your net worth by subtracting your total liabilities (b) from your total assets (a).
First-time buyers can skip this section. If you already own a home, you'll need to fill out the columns for each property you own.
Is it a condo, single-family home, duplex, town home or something else?
To get an estimated market value, use either a recent appraisal or a comparative market analysis.
Enter the total amount of outstanding loans or liens on the property.
If this is a rental property, enter the monthly rental income before taxes, maintenance and other expenses.
Enter your total monthly mortgage payment for the property (or if there is more than one mortgage, enter the total of all mortgages together).
Enter recurring monthly expenses here such as insurance, taxes, and maintenance, but don't include utilities like electricity and water.
If this is a rental property, figure out the net rental income by subtracting your total for mortgage, insurance, maintenance, taxes and other expenses from your gross rental income.
List any alternate names under which you had a credit card, loan or line of credit, and include the creditor's name and your account number. This may include a maiden name or any names used prior to a name change.
Enter the purchase price of the home you are trying to buy.
If any of the loan is being used to make alterations, repairs or improvements to the property, list the total for those costs.
If any of the loan is being used to purchase land that is separate from the property price, enter the total cost for the land.
If any of the loan is being used to refinance existing debt, include those costs.
Enter the total estimated costs for any prepaid items such as insurance and taxes. If you're not sure what will be prepaid, talk to your lender about anticipated costs.
Closing costs can run between 1% and 4% of the purchase price. They include fees you must pay to your lender or broker for funding the loan, title searches and insurance, appraisals, etc. Your lender can give you guidelines about how they calculate closing costs.
You'll be required to purchase PMI (private mortgage insurance) if you put down less than 20% on your home purchase. This is to protect the lender in case you default. MIP (mortgage insurance premium) is a similar policy that borrowers of FHA loans must purchase. Funding fees are charged on VA (Veteran's Affairs) loans.
Many borrowers pay discount “points” upfront in exchange for a lower interest rate on their loan. Each discount point costs 1% of the loan amount. Each discount point will lower the interest rate between 1/8 and 1/4 of a percentage point.
Add the items in this column for an estimate of the total cost of the loan.
This section addresses questions about debts, lawsuits, foreclosures and bankruptcies that might impact your ability to repay your mortgage.
This is any loan or loans aside from the loan you're applying for that will be used to finance your home purchase.
In some cases, a seller may agree to pay for some of the buyer's closing costs. If you have such an agreement with the seller, enter the amount to be paid.
This space is for any other credits you may be receiving for your home purchase.
This should be the same amount as stated on page 1 in section 1. If you're planning to finance your PMI, MIP or Funding Fee, you will include that in the next line.
In some cases, you can choose to finance your PMI, MIP and funding fee. This means that these costs would be added to your loan balance, and you'd pay it off with interest throughout the life of the loan. If you're financing these costs, use the amount from line G on page 3 here. Make sure you understand the pros and cons of doing this. You may end up paying much more than you'd expect by financing.
This is the total of lines M and N.
This is the total amount of cash that you'll need to bring to the closing table in order to finalize your home purchase. You'll need to deposit this money with the escrow company, title company, or attorney overseeing the transaction before the actual closing date.
In this section, you'll answer questions about your current debt situation. If you answer yes to any of these questions, you'll need to provide an explanation in the space provided on page 5.
This section asks questions about your current citizenship and whether this home will be your primary residence.
The purpose of this section is to gather information about your race, ethnicity and gender that the government uses to ensure that lenders comply with federal fair housing guidelines.
This section will be filled out by your lender.
Use this section to include any information that could not fit on previous pages of the loan application.