What is the 1003 mortgage application form?
The 1003 mortgage application form is the industry standard form used by nearly all mortgage lenders in the United States. This basic form, or its equivalent, must be completed by a borrower to apply for a mortgage. While some lenders may use alternative forms or simply accept basic borrower information about identity, property type and value, the vast majority of lenders rely on the 1003 form.
Generally, the 1003 form is completed twice during a mortgage transaction: once during the initial application and once at closing to confirm the terms of the loan. Some lenders allow borrowers to complete the form at home, while others assist borrowers in person or over the phone. In either case, a potential borrower should understand the 1003 format and the information required before completing the form.
Why the 1003?
The 1003 loan application form, also called the Uniform Residential Loan Application, was developed by the Federal National Mortgage Association, or Fannie Mae, as a standardized form for the industry. Fannie Mae and its sibling, the Federal Home Loan Mortgage Corp., or Freddie Mac, are lending enterprises created by Congress to maintain liquidity in the mortgage market. These entities purchase mortgages from individual lenders and hold the loans in their own portfolios, or sell the loans to other entities as part of a mortgage-backed security (MBS). By selling consumer mortgage debt to these federally backed entities, lenders maintain the liquidity necessary to continue offering new loans.
Mortgages need to be documented in the way that Fannie Mae and Freddie Mac dictate. Since both entities require the use of Form 1003, or Form 65, its Freddie Mac equivalent, for any mortgage they consider for purchase, it is simpler for lenders to use the appropriate form at the outset than to try to transfer information from a proprietary form to a 1003 when it comes time to sell the mortgage.
The 1003 form includes all the information a mortgage lender needs to determine whether a potential borrower is worth the risk of the loan. This includes information about the borrower's identity. While some lenders do not require employment information to consider a new mortgage, the 1003 form requires up to two years of employment history to be entered for each borrower. This is used as a means of establishing the financial security and reliability of the borrower.
The 1003 form also requires a borrower to disclose the total monthly income for his household, as well as his regular monthly expenses. In addition to this information, the form requires an itemized list of the borrower's assets and liabilities to determine whether they can afford monthly mortgage payments. Borrower assets include anything that could be used or liquidated to cover loan payments, such as checking and savings accounts; stocks, bonds, mutual funds or other investments; IRA, 401(k) or similar retirement accounts; and life insurance policies. Lenders need to be aware of any and all debts for which the borrower may be liable, in addition to his mortgage payments, such as car loans, credit card debt, student loans or open collection accounts. If the borrower owns any other property, either as an investment or second home, the 1003 form requires the disclosure of these assets and any mortgages that may be tied to them.