Loan Inquiry and Application Process
Requirements Study Guide
Information on Form 1003 - Answer-Section 1:Borrower Information: This section asks
about the borrower's personal information and their income from employment and other
sources, such as retirement, that you want considered to qualify for this loan. (birthdate, ages of
children, marital status, etc.)- Current, Additional, and Previous Employment/Self-Employment
and Income: Must provide at least 2 years of current and previous employment and income.-
Income from Other Sources: alimony, child support, disability, public assistance, unemployment,
etc.Section 2:Financial Information — Assets and Liabilities: This section asks about things the
borrower owns that are worth money and that they want considered to qualify for this loan. It
then asks about their liabilities (or debts) that they pay each month, such as credit cards,
alimony, or other expenses.- Assets - Bank Accounts, Retirement, and Other Accounts You Have:
checking, savings, retirement 401K, stocks, etc.- Other Assets and Credits You Have: Assets =
Proceeds from Real Estate Property to be sold on or before closing, Proceeds from Sale of Non-
Real Estate Asset , Secured Borrowed Funds/ Credits = Earnest Money, Employer Assistance, Lot
Equity, Relocation Funds, Rent Credit, Sweat Equity- Liabilities - Credit Cards, Other Debts, and
Leases that You Owe: Revolving (e.g., credit cards), Installment (e.g., car, student, personal
loans), not real estate- Other Liabilities and Expenses: Alimony, Child Support, Separate
Maintenance, Job Related ExpensesSection 3:Financial Information — Real Estate: This section
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Page 2/11
asks them to list all properties they currently own and what they owe on them.- Property You
Own: mortgage loans, rental income, Monthly Insurance,Taxes, Association Dues, etc.- Any
Additional Properties You OwnSection 4:Loan and Property Information: This section asks about
the loan's purpose and
. Handling credit report discrepancies - Answer-You are not a credit repair professional, you
can counsel the borrower as to what should be done, but you can't do it for the borrower.
Acceptable gift donors - Answer-Immediate blood relative and no evidence of any
repayment requiredSome lenders permit gifts from a non-relative such as a godparent, a close
family friend, an employer or a government agency. Before approving these funds, the bank
verifies the relationship between borrowers and their donors to ensure the donor doesn't have
any interest in the property being purchased.
. Information provided to a borrower in response to a loan inquiry - Answer-Notice Of
Adverse Action
Required disclosures that must be provided to a borrower in response to a loan inquiry -
Answer-Initial Loan Estimate, Intent to Proceed, Loan Tool Kit (Special Information Booklet),
Preferred Provider's List, AFBA, Mortgage Servicing Disclosure Statement and Homeownership
Counseling Disclosure are to be delivered within three business days from signed application
Application accuracy and required information on an application (e.g., name, Social Security
number, address of property to be financed, estimated property value, income, loan amount) -
Answer-Section 6 Acknowledgments and Agreements states in the section (1) The Complete
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Page 3/11
Information for this Application that"The information I have provided in this application is true,
accurate, and complete as of the date I signed this application. • If the information I submitted
changes or I have new information before closing of the Loan, I must change and supplement
this application, including providing any updated/supplemented real estate sales contract.""The
terms and conditions of any real estate sales contract signed by me in connection with this
application are true, accurate, and complete to the best of my knowledge and belief.""The
Lender and Other Loan Participants may rely on the information contained in the application
before and after closing of the Loan."AND"Any intentional or negligent misrepresentation of
information may result in the imposition of: (a) civil liability on me, including monetary
damages, if a person suffers any loss because the person relied on any misrepresentation that I
have made on this application, and/or (b) criminal penalties on me including, but not limited to,
fine or imprisonment or both under the provisions of Federal law (18 U.S.C. §§ 1001 et seq.)."
How MLOs accept loan applications - Answer-In person, computer application, written
application, and phone application
Offering and negotiating the terms of a loan - Answer-Only licensed individuals can
negotiate terms with the borrower (i.e. MLO, NOT loan processor
How MLOs manage information on an application - Answer-ethnicity, sex, and race- can ask
about alimony or child support that they pay because that is part of their debts- cannot ask
about alimony or child support that they receive unless they offer that information or it is part
of their income that they are using to qualify
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Page 4/11
Permissible questions on an application - Answer-ethnicity, sex, and race- can ask about
alimony or child support that they pay because that is part of their debts- cannot ask about
alimony or child support that they receive unless they offer that information or it is part of their
income that they are using to qualify
Verification and documentation - Answer-Most of the time the borrower is going to have to
show two (2) years of income, most underwriters want to see that income be from the same
employer or at least in the same line of work. There can be exceptions to that rule (FHA loans,
for one), but the general rule of thumb is two years of income.There are some types of income
that do have a defined expiration date and will require proof of at least a three (3)-year
continuance from the time the loan is originated (i.e. Alimony or child support, public
assistance, Social Security)
Forms used to authorize the release of information - Answer-Borrowers Signature
Authorization
Methods of verifying income and assets - Answer-All income for Fannie, Freddie, FHA,
USDA, and VA loans must be verified with at least two month's W-2's, 1099's, the most recent
pay stub and tax returns with a 4506T verifying the validity of the tax returns with what the IRS
has.Income not claimed on a tax return cannot be used.Most of the time the borrower is going
to have to show two (2) years of income, most underwriters want to see that income be from
the same employer or at least in the same line of work.For some bonus or overtime income, the
underwriter must get a completed Form 1005 or the borrower's most recent pay stub and IRS
W-2 forms covering the most recent two-year period.Self employed - two years personal tax
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Page 5/11
returns and if the borrower owns 25% or more of the company then business tax returns and a
year to date operating statementAssets verified by two months bank statements and
investment statements as well as Verification of Deposit.
Percentage of bank account assets attributable toward a loan application - Answer-All of the
borrower's assets must be verified if they are required to close the loan transaction. The
underwriter is likely going to require a Request for a Verification of Deposit (VOD) this is a form
filled out by the borrower's depository institution that will verify the borrower has those funds
available to them.The underwriter might also require the borrower's bank statements; the
statements must cover the most recent full two-month period of account activity (60 days).For a
reserve to be considered seasoned and acceptable, the funds must be on deposit in a financial
institution in the borrower's name for at least sixty (60) days.
Methods of verifying employment - Answer-The underwriter must obtain a completed
Request for Verification of EmploymentThe processor will complete the Request for Verification
of Employment (VOE). A VOE is a form filled out by the borrower's employer, stating that they
employ the borrower and confirm the borrower's income.
Reflecting the type of loan on a mortgage application - Answer-Section 4: Loan and Property
Information. This section asks about the loan's purpose and the property they want to purchase
or refinance.Loan Amount, Loan Purpose (purchase, refinance, other), Property Address,
Property Value, Occupancy (primary, second home, investment property), Mixed-Use Property?,
Manufactured Home?
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Page 6/11
Scenarios and which allowable tolerance - Answer-Fees that are considered zero-tolerance
include:- Fees paid to the lender, mortgage broker or an affiliate of either.- Fees paid to an
unaffiliated third party if the lender did not permit the consumer to shop for the third-party
provider for a settlement service; or- Transfer taxes.Fees that are considered no tolerance fees
include:- Prepaid interest.- Property insurance premiums.- Amounts placed in escrow, impound
or reserve or similar account; or- For services required by the lender, if the lender permits the
consumer to shop and theconsumer selects a third-party service provider, NOT on the lender's
written list of service providers.Fees that are considered a 10 percent tolerance fee include:-
Recording fees.- Charges for third-party services where:o The charge is not paid to the lender or
the lender's affiliate.o The consumer is permitted by the lender to shop for a third-party
service;o The consumer selects a service provider on the lender's written list of serviceproviders
Service charges subject to a 10% tolerance - Answer-If a borrower selects someone off the
lender's service provider list, then that fee now falls into the 10 percent cumulative fee
tolerance.If any amount paid by the consumer at closing exceeds the a
Content preview
EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
Loan Inquiry and Application Process
Requirements Study Guide
Information on Form 1003 - Answer✔✔-Section 1:Borrower Information: This section asks
about the borrower's personal information and their income from employment and other
sources, such as retirement, that you want considered to qualify for this loan. (birthdate, ages of
children, marital status, etc.)- Current, Additional, and Previous Employment/Self-Employment
and Income: Must provide at least 2 years of current and previous employment and income.-
Income from Other Sources: alimony, child support, disability, public assistance, unemployment,
etc.Section 2:Financial Information — Assets and Liabilities: This section asks about things the
borrower owns that are worth money and that they want considered to qualify for this loan. It
then asks about their liabilities (or debts) that they pay each month, such as credit cards,
alimony, or other expenses.- Assets - Bank Accounts, Retirement, and Other Accounts You Have:
checking, savings, retirement 401K, stocks, etc.- Other Assets and Credits You Have: Assets =
Proceeds from Real Estate Property to be sold on or before closing, Proceeds from Sale of Non-
Real Estate Asset , Secured Borrowed Funds/ Credits = Earnest Money, Employer Assistance, Lot
Equity, Relocation Funds, Rent Credit, Sweat Equity- Liabilities - Credit Cards, Other Debts, and
Leases that You Owe: Revolving (e.g., credit cards), Installment (e.g., car, student, personal
loans), not real estate- Other Liabilities and Expenses: Alimony, Child Support, Separate
Maintenance, Job Related ExpensesSection 3:Financial Information — Real Estate: This section
Page 1/11
, EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024
asks them to list all properties they currently own and what they owe on them.- Property You
Own: mortgage loans, rental income, Monthly Insurance,Taxes, Association Dues, etc.- Any
Additional Properties You OwnSection 4:Loan and Property Information: This section asks about
the loan's purpose and
. Handling credit report discrepancies - Answer✔✔-You are not a credit repair professional, you
can counsel the borrower as to what should be done, but you can't do it for the borrower.
Acceptable gift donors - Answer✔✔-Immediate blood relative and no evidence of any
repayment requiredSome lenders permit gifts from a non-relative such as a godparent, a close
family friend, an employer or a government agency. Before approving these funds, the bank
verifies the relationship between borrowers and their donors to ensure the donor doesn't have
any interest in the property being purchased.
. Information provided to a borrower in response to a loan inquiry - Answer✔✔-Notice Of
Adverse Action
Required disclosures that must be provided to a borrower in response to a loan inquiry -
Answer✔✔-Initial Loan Estimate, Intent to Proceed, Loan Tool Kit (Special Information Booklet),
Preferred Provider's List, AFBA, Mortgage Servicing Disclosure Statement and Homeownership
Counseling Disclosure are to be delivered within three business days from signed application
Application accuracy and required information on an application (e.g., name, Social Security
number, address of property to be financed, estimated property value, income, loan amount) -
Answer✔✔-Section 6 Acknowledgments and Agreements states in the section (1) The Complete
Page 2/11