Whether the AUS approval for conventional loans is comparable to AUS eligible orders

AUS Approval On Conventional Loans Versus Refer-Eligible Per AUS

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About AUS Approval On Conventional Loans Versus Refer-Eligible Per AUS:

How To Get A AUS Approval On Conventional Loans Versus Refer-Eligible Per AUS: There is no manual underwriting on conventional loans. Therefore, a refer/eligible per AUS is nothing on conventional loans. You need to get an approve/eligible findings from the automated underwriting system to proceed on conventional loans. FHA and VA loans are the only two loan programs that manual underwriting is allowed. You can proceed with a manual underwrite on a refer/eligible per AUS on FHA and VA loans. However, the borrower needs to meet the minimum agency guidelines on manual underwriting.

The good news is that experienced loan officers can try to get a refer/eligible per AUS on conventional loans to an approve/eligible per automated underwriting system. It is possible by manipulating the system. By manipulating the system is by adding positive factors such as larger reserves, larger down payment, no co-borrowers, more assets, or other compensating factors. In this article, we will discuss and cover ways of getting an approve/eligible per AUS on conventional loans.

The Importance Of An Automated Underwriting System Approval Findings On Conventional Loans

AUS Approval On Conventional Loans is required in order for a lender to proceed to process and underwrite conventional loans. AUS Approval On Conventional Loans means the borrower needs to get an approve/eligible per automated underwriting system (AUS). Refer/Eligible per automated underwriting system (AUS) means that the automated underwriting system cannot render an automated approval. Refer/eligible means that the borrower may be eligible but needs to be manually underwritten. Unfortunately, I do not know of any lenders that manually underwrite conventional loans. FHA and VA Loans can be manually underwritten with refer/eligible automated findings. In this blog, we will discuss AUS Approval On Conventional Loans and options for borrowers who get a refer/eligible per AUS.

Automated Underwriting System

All lenders are required to run the Automated Underwriting System on all government and conventional loans. There are two types of the Automated Underwriting System:

  • Fannie Mae’s Desktop Underwriter (DU AUS)
  • Freddie Mac’s Loan Prospector (LP AUS)

The Automated Underwriting System (AUS) is a sophisticated computer system that analyzes the borrowers’ credit and income profile in a matter of seconds. It renders one of three decisions:

  1. Approve/Eligible: This means that the borrower has an automated approval
  2. Refer/Eligible: This means the borrower may or may not be eligible and needs a human mortgage underwriter to manually underwrite the file
  3. Refer with caution: This means the borrower does not meet the guidelines and is an automated mortgage denial

FHA and VA Loans allow refer/eligible manual underwriting. However, conventional loans do not allow manual underwriting. We will discuss the options conventional mortgage borrowers with a refer/eligible per AUS has in proceeding with their conventional mortgage process.

Solutions On Refer/Eligible AUS Findings On Conventional Loans

what are the arrangements for AUS applications / eligible outcomes for conventional loans

There are several solutions for borrowers who cannot get an approved/eligible per AUS on conventional loans. First, find out the reason why the AUS is rendering a refer/eligible versus approve/eligible Is it higher debt to income ratios? Is it because of adding non-occupant co-borrowers? Is it due to gift funds? Is it due to recent late payments in the past 12 months? Is it due to no or very few reserves? Is it due to late payments after bankruptcy and/or foreclosure? Is it due to maxed-out credit card balances?  Is it due to multiple jobs in the past 24 months? The loan officer can try to switch from Fannie Mae to Freddie Mac’s AUS or vice versa. The loan officer should try adding a larger down payment and see if that does the trick.

Late Payments After Bankruptcy And Housing Event

There are times where Fannie Mae will issue a refer/eligible and Freddie Mac will issue an approve/eligible. The loan officer can play around with the automated underwriting system to see if they can get an approve/eligible per AUS. They can enter more reserves, take out the non-occupant co-borrowers, take out the gift funds, adding more down payment. Non-occupant co-borrowers, gift funds, high credit card balances, lower credit scores, recent late payments, and higher debt to income ratios are not viewed favorably by the automated underwriting system.

Late payments after bankruptcy and/or foreclosure are viewed very negatively by the automated underwriting system. Lenders consider borrowers with late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short-sale as second offenders. Many lenders will deny and/or disqualify borrowers with late payments after bankruptcy and/or housing event for a mortgage even with AUS Approval as part of their overlays.

Switching To Other Loan Programs

Just because borrowers cannot get AUS Approval on conventional loans does not mean they cannot get an AUS Approval with other loan programs. Borrowers who cannot get an AUS Approval on Conventional Loans can see if they can switch to FHA Loans. Or they may consider non-QM loans. For more information on this topic or need help in qualifying for a mortgage with a mortgage company licensed in multiple states with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Not only are we nationally known for not having lender overlays on government and conventional loans but Gustan Cho Associates is known for its dozens of non-QM and alternative loan programs. We are known to be a one-stop mortgage lending shop. Gustan Cho Associates has dozens of lending partnerships with non-QM wholesale lenders. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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