Written By: Joan Ewing, Op-Ed Writer
Hello Everybody – Hope everyone is staying busy. In my hunt for a topic every week, sometimes it is easy and other times, I haven’t a clue what I will write about until the last minute. This week was one of those last minute thoughts – so I hope this blog is helpful.
This week, I have decided to cover completing a basic Mortgage Application – 1003. While this may seem elementary, I find those persons who do the same job every day may become complacent and forget why it is important to complete certain parts of the application. One issue to remember is – the more completed information that is on the 1003 – the easier the job for the processor and your loan will get to underwriting faster. Isn’t that the process that would make everyone happy, including the borrower?
Another reason it is important that all pertinent sections of the Loan Application be completed is because the 1003 downloads into the Automated Underwriting System (AUS). Any information not on the 1003 must be manually inputted. This, of course, if not only time consuming but if the processor or underwriter must research the information it takes time.
I have noticed in my years of underwriting – there are specific sections of the 1003 that do not get completed. Don’t know why – but it seems the same sections are always neglected – So let’s go over some essentials, which are most commonly missed.
Starting at the top of the 1003 – Section I – Type of Mortgage and Terms of Loan. This is a very self-explanatory statement. However, the type of loan – VA, FHA, and Conventional – must be completed or the processor will not know how to download the application to the AUS.
The next section that is 95% neglected is the II – Property Information and Purpose of Loan – fourth section down – COMPLETE THIS LINE IF THIS IS A REFINANCE LOAN. If this application is a refinance – this section must be completed with year acquired – original cost; amount of existing liens; purpose of refinance. This is absolutely essential when running the AUS. If this information is not on the original 1003; it must be researched by the processor or underwriter, again taking more time.
Another neglected section of the Mortgage Application seems to be the “Years of School”. I image some loan officers feels embarrassed to ask this question because I would say 90% of the applications – this question is not answered. Let me explain the importance of this question.
A borrower states his occupation as a School Teacher, the years of school is not completed; however, it is safe to assume a school teacher has at least 16 years of school. However, you learn the borrower is actually a Teacher Assistant with 12 years of school. If the years of school, would have been completed on the application – 12 years of school would have been a red flag the borrower was not a School Teacher. Having said these examples – certain occupations reflect the number of school years that should have been completed and it must all make sense.
Going down the first page of the application – It is important to enter the borrower’s home or cell telephone number. If the processor needs to contact the borrower – the telephone number on the application is very handy and again saves time because the processor does not need to contact the loan officer.
The last section – I will cover this week is the Years on Current job. Since everyone knows, two years of employment must be verified – many times the number of years on job is listed as “2 years” even if it is one year and three months. Again more processing time has just been added prior to giving the file to underwriting. When the processor looks at the W2 for the past two years, she can ascertain if the borrower has actually been on the job for two years. If the borrower's W2 for the prior year is much lower than the current year to date income; chances are the borrower has not been on his present job for two full years.
Joan Ewing - As an op-ed writer and active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base.