Taking out a mortgage is something that some would consider as a necessary evil. Not because it represents expenses that would need to be paid off for more than just a few years, but because the work around just getting the mortgage approved promises to take a huge effort on the borrower’s part. This is especially true during the first step of the application process, which is the filling up of the form 1003.
One reason why people find it hard to fill out the said form is because they do not understand the need for the required information. Without the understanding, they think that the form is useless and is a form of a scam. So before picking up the form 1003, do remember that this has to be filled up in order to protect both the borrower and the lender. The borrower will be protected because he will be assured a fair rate for the loan, while the lender is protected because he will be assured that he is not entering a bad debt agreement.
With that said, let’s take a look at the portions of the form and see why these need to be provided:
I) Type of Mortgage and Terms of Loan – this portion is more for the lender to fill out, although one should be aware of what is written on it. Take note of the amount of the loan and the rate, and do remember that this may change after evaluation of all papers submitted. Do ask about the type of mortgage and amortization type just to understand what is being indicated.
II) Property Information and Purpose of Loan – this is to identify the property to be purchased or refinanced, as well as the names of the people who will be on the title (should this be a purchase). Other portions here also ask if it will be a construction, and if it’s to be the first purchase of the buyer or not.
III) Borrower Information – this area will ask for the Social Security Number, marital status, residential address and history of both the borrower and the co-borrower. Some proof of identity may be requested in order to verify the validity of the borrower’s identity.
IV) Employment Information – from this point on, the form will start to request for information dealing with the funds of the borrower and the co-borrower (if applicable). This portion will ask for specific information regarding employment as well as previous employment, as well as the duration that time was spent with each.
V) Monthly Income and Combined Housing Expense Information – This will have the income of both borrower and co-borrower, compared side-by-side with the current expenses that both have, including taxes, rental fees, insurances and homeowner dues. Alimony, child support and other maintenance income would not be required in this field.
VI) Assets and Liabilities – The goal of the form 1003 is to get a good picture of whether the borrower could pay the lender the agreed amount. To get an accurate fix on this, the borrower must give a detailed list of all loans, investments, stocks, bonds and retirement accounts that he has, as well as other properties that may increase his net worth. Here, alimony and child support need to be declared.
VII) Details of Transaction – These numbers are a breakdown of all the costs of the mortgage, as well as the credits coming from the transaction. The final number at the end of this section is what the borrower will need to bring with him during the sealing of the deal.
VIII) Declarations – This section will have questions which one will need to answer truthfully.
The rest of the form will simply require your signature, as well as some other information that you may want to provide. Section X will ask the borrower to provide race and ethnicity. This will not be a requirement, but it is used by the government to make sure that lending institutions to not discriminate their clients in any way.
Some items of note: when filling out the form 1003, supporting documents will most likely be required. Have a talk with the loan officer in order to get a list of these documents in one go. A healthy discussion of what you will declare may ensue before a complete list is provided. The faster the documents are completed, the sooner the response regarding your application.