AUS Approval On Conventional Loans Versus Refer/Eligible

AUS Approval on Conventional Loans: What It Means and How to Get Approved

If you’re applying for a conventional mortgage, getting an AUS approval on conventional loans is a key step in the process. But what does that even mean? And what happens if you don’t get approved right away?

In this simple guide, we’ll break down what AUS approval is, why it’s so important for conventional loans, what you can do if you get a “refer” instead of an approval, and how the team at Gustan Cho Associates can help you qualify even when other lenders say no.

What Is AUS Approval on Conventional Loans?

AUS stands for Automated Underwriting System. Lenders use this digital system to see if you qualify for a mortgage. It reviews your credit, income, assets, and other factors and gives one of three responses:

• Approve/Eligible: You meet the loan guidelines and can move forward.
• Refer/Eligible: You might still qualify, but the system can’t approve you automatically.
• Refer with Caution: You don’t meet the requirements. This is usually a denial.

Only the Approve/Eligible result means you’re good to go for conventional loans. No manual underwriting is allowed on conventional loans, so if you get a “refer,” the loan can’t move forward with most lenders.

That’s why getting an AUS approval on conventional loans is so important.

Which AUS Systems Do Lenders Use?

Lenders use one of two AUS systems:

Fannie Mae’s Desktop Underwriter (DU)

This is one of the two main systems lenders use. It helps them review loan applications and see if they meet certain rules before giving approval. Fannie Mae is a company that buys loans from lenders, which helps keep money flowing in the housing market.

Freddie Mac’s Loan Product Advisor (LPA)

This is the second system lenders use. Like DU, it helps lenders check if a loan application is strong enough to be approved. Freddie Mac also buys loans and helps make housing affordable for more people.

Each one has slightly different rules and formulas. Sometimes, if you get a “refer” on DU, you can get an “approve” on LPA, and vice versa. A competent loan officer knows how to try both to get you approved.

What Happens If You Get a Refer/Eligible?

If you don’t get an AUS approval on conventional loans right away, don’t panic. It doesn’t always mean you’re denied. It just means the computer needs more strength in your file to give you the green light.

Some reasons the system may say “refer/eligible” include:

• High debt-to-income (DTI) ratio
• Low credit score
• Late payments in the last year
• Using gift funds
• Having no savings or reserves
• Recent job changes
• Late payments after bankruptcy or foreclosure

A skilled loan officer can review your file and determine the best way to turn that referral into an approval.

How to Get an AUS Approval on Conventional Loans

There are many ways to strengthen your file and get an AUS approval on conventional loans. Here are some of the most effective strategies:

1. Add a Bigger Down Payment

Putting more money down can help you a lot. Paying 1-2% more at the start shows the lender you are serious and lowers their risk.

2. Increase Your Savings

Having extra money saved is good. It shows you can still handle your finances after buying your home. AUS likes to see you have money left in the bank after closing.

3. Pay Off Some Debt

If you can pay off credit cards or loans, it lowers your debt-to-income ratio (DTI). A lower DTI can change your application from “refer” to “approve,” making getting AUS approval on conventional loans easier.

4. Remove Co-Borrowers

Sometimes, having a co-borrower can hurt your chances if they have bad credit or high debt. If you can, try applying without them to improve your chances of approval.

5. Improve Your Credit Score

Improving your credit score can lead to positive changes. Settlement of minor debts or correction of errors on your credit report can rapidly enhance your score and increase your chances of getting approved.

6. Switch from DU to LPA or Vice Versa

Just because one system says “refer/eligible” doesn’t mean the other will. Sometimes, simply changing your system can help you get AUS approval on conventional loans.

At Gustan Cho Associates, our team knows how to work the system correctly — using legal and ethical methods to improve your file and get you approved.

Why Late Payments After Bankruptcy or Foreclosure Matter

It can be a big red flag to AUS if you’ve had a bankruptcy, foreclosure, deed-in-lieu, or short sale and then had late payments after that event. These are called “second offenses,” and many lenders won’t approve you even if you technically meet the guidelines.

At Gustan Cho Associates, we look past these issues. If you qualify under Fannie Mae or Freddie Mac guidelines, we can assist you in progressing, even if other lenders decline your application.

What If You Still Can’t Get Approved?

There are still options if you can’t get an AUS approval on conventional loans.

Option 1: Switch to an FHA Loan

FHA loans allow for manual underwriting if you get a “refer.” That means a human underwriter can review and approve your file based on compensating factors like on-time rent, steady income, or large reserves.

Option 2: Try a Non-QM Loan

Non-QM (non-qualified mortgage) loans are great for people who don’t fit into traditional lending boxes. These loans can be based on bank statements, assets, or just rental income (DSCR loans). No AUS approval is required.

We offer dozens of non-QM loan programs for self-employed borrowers, investors, and people with unique situations.

How Gustan Cho Associates Can Help

Gustan Cho Associates is different from most lenders. Here’s how:

• No lender overlays: If Fannie or Freddie allows it, so do we.
• We work 7 days a week: Including nights, weekends, and holidays.
• We’re experts in tough files: We help people get approved when other banks say no.
• Licensed in multiple states: We serve homebuyers all across the country.

If you’re stuck with a “refer” or want to make sure you get the best deal, we can help you get that AUS approval on conventional loans and get you to the closing table.

Final Thoughts

Getting an AUS approval on conventional loans is an important step in buying a home or refinancing. It tells the lender you’re good to go and gives you a smoother path to closing. If you don’t get approved immediately, there are ways to fix it.

The key is working with a mortgage team that understands the rules and knows how to help.

At Gustan Cho Associates, we’re here to make it happen. Whether you need help fixing your file, switching to FHA, or exploring non-QM options, we have your back. Call or text us at 800-900-8569, or email alex@gustancho.com today to get started.

Let’s get that AUS approval on conventional loans — and bring you home!

Frequently Asked Questions About AUS Approval on Conventional Loans:

Q: What is AUS Approval on Conventional Loans?

A: AUS approval on conventional loans means a computer system has reviewed your file and given you the green light to move forward with your mortgage. It looks at things like your credit, income, and debts.

Q: Why do I Need AUS Approval on Conventional Loans?

A: You need AUS approval on conventional loans because lenders can’t approve your loan without it. Manual underwriting isn’t allowed for conventional loans, so getting an “approve/eligible” result is a must.

Q: What Happens if I Get a “Refer” Instead of an Approval?

A: If you get a “refer,” it means the system isn’t ready to approve you yet. You may still qualify, but you’ll need to fix something in your file. Most lenders won’t move forward without AUS approval on conventional loans.

Q: Can I Still Get a Mortgage if I don’t Get AUS Approval on Conventional Loans?

A: Yes! Even if you don’t get AUS approval on conventional loans, you might still qualify for an FHA loan (which allows manual underwriting) or a non-QM loan, which doesn’t use AUS.

Q: What Steps Can I Take to Increase My Chances of AUS Approval on Conventional Loans?

A: You can increase your chances by improving your credit score, paying off some debt, saving money, or adding a bigger down payment. These changes help the system feel more confident about your loan.

Q: Can Switching from DU to LPA Help Me Get Approved?

A: Yes, sometimes switching from Fannie Mae’s Desktop Underwriter (DU) to Freddie Mac’s Loan Product Advisor (LPA), or vice versa, can get you AUS approval on conventional loans. Each system works a bit differently.

Q: Does having a Co-Borrower Help or Hurt My AUS Results?

A: It depends. A co-borrower with good credit and income can help. However, if they have low credit or high debt, it could hurt your chances of AUS approval on conventional loans.

Q: What if I had a Bankruptcy or Foreclosure in the Past?

A: The AUS system might deny you if you’ve had a bankruptcy or foreclosure and then had more late payments. But Gustan Cho Associates looks deeper at your file and may still be able to help.

Q: What’s the Difference Between Conventional Loans and FHA Loans When it Comes to AUS?

A: With conventional loans, you must get AUS approval. FHA loans allow manual underwriting, which means a real person can review and approve your file if you don’t get approved by the computer.

Q: How Can Gustan Cho Associates Help Me Get AUS Approval on Conventional Loans?

A: We’re experts in tough files and know how to strengthen your application. We don’t have lender overlays and work with borrowers 7 days a week. If others say no, we’ll help you find a way to say yes.

This blog about “AUS Approval On Conventional Loans Versus Refer/Eligible” was updated on April 1st, 2025.