Fannie Mae Automated Underwriting System Approval
This BLOG On Fannie Mae Automated Underwriting System Approval Was UPDATED On October 25th, 2018
Borrowers normally need an automated approval by the Automated Underwriting System also referred to AUS in order to proceed with their mortgage loan process. There are two types of Automated Underwriting Systems:
- Fannie Mae
- Freddie Mac
Fannie Automated Underwriting System Approval is called Desktop Underwriter or DU. Freddie Mac Automated Underwriting System Approval is called Loan Prospector or LP. Both AUS Systems are similar but Fannie Mae’s AUS is much more common and not every mortgage company uses Loan Prospector. On this BLOG, we will discuss the Fannie Mae Automated Underwriting Approval System.
How Fannie Mae Automated Underwriting System Approval System Works
Home Buyers who are interested in purchasing a new home, the first step will be to consult a loan officer to see if they qualify for a home mortgage loan. There are several steps mortgage borrowers need to go through to get qualified and pre-approved. Every mortgage lender has different mortgage requirements.
There are two stages of the mortgage process by lenders:
- Loan Applicants first need to meet the minimum mortgage guidelines of the loan program they apply for and get an approve/eligible per Automated Underwriting System
- Second, most lenders have overlays which are lending requirements that is above and beyond those of the Fannie Mae Automated Underwriting System Approval
- The Gustan Cho Team at Loan Cabin Inc. has no lender overlays
- So we only go by Automated Underwriting System Approval
Home Shopping And Mortgage Process
Borrowers will need a pre-approval from lender to start shopping for a home and enter into a real estate purchase contract:
- Loan officer will take the official mortgage loan application also called the 1003
- Loan Officer will require to see borrower’s income, assets, and liabilities
- Lender will then run a credit check to review borrower’s credit scores, credit history, and overall profile of borrowers
- There are two ratios loan officer will need to see
- Loan officer will see whether borrowers qualify for a home loan program
- The first ratio is called the front end ratio or the housing ratios
- The front end ratio is the total monthly housing expenses
- Front DTI is the borrowers principal and interest of mortgage payment
- Mortgage insurance is part of the housing expenses
- Annual insurance premium divided by 12
- Private mortgage insurance premium if it is a conventional loan
- If borrower has less than 20% down payment PMI is mandatory
- Monthly mortgage insurance premium on FHA Loans
- Property taxes divided by 12
- Homeowners insurance premium divided by 12
- If home is located in a community where there is homeowner association dues, that will be calculated as part of monthly housing expenses
- The front end ratios is calculated by dividing all of monthly housing expenses by total monthly gross income
- The maximum front end housing ratio that Fannie Mae Automated Underwriting System will allow for a FHA insured mortgage loan is 46.9%. to get automated approval
- The back end ratios is calculated as follows:
- by dividing the total expenses including the housing ratios as well as automobile payment
- student loans
- minimum credit card payments
- The above is added and divided by borrowers gross month income
- The total back end ratios allowed for a Fannie Mae Automated Underwriting System loan approval for a FHA Loan is 46.9% front end and 56.9% back end to get approve/eligible
Automated Underwriting System Findings On VA Loans
Why do lenders have different requirements on VA Loans?
- Some Lenders require a 640 credit scores on VA Loans
- Other Lenders will require a 620 credit scores
- Still other lenders will go down to a 580 credit score on VA Loans
- Some Lenders cap Debt To Income Ratios to 41% on VA Loans
- Other Lenders debt to income ratio caps is set at 50%
The answer to the above question is that the Department Of Veteran Affairs (VA) does not have any minimum credit score requirements on VA Loans.
- VA does not have any debt to income ratio requirements on VA Loans
- So why is it that all of these Veteran Friendly Mortgage Lenders have all of these high lending guidelines?
- The reason is due to VA Lender Overlays
- VA requirements is that as long as they get an approve/eligible per Automated Underwriting System Findings, the Department Of Veteran Affairs will guarantee the VA Loan
- However, VA Lenders can have higher VA lending requirements of their own which are called VA Lender Overlays
Gustan Cho Associates at Loan Cabin Inc. has NO OVERLAYS ON VA LOANS.
Approve/ Eligible Per DU Findings
Getting a Fannie Mae Automated Underwriting System approval is key.
Fannie Mae Automated Underwriting System is like a super brain that will take everything about a mortgage loan borrower into account.
- The Fannie Mae Automated Underwriting System will take the FOLLOWING into account and render a decision in a matter of seconds:
- Credit scores
- Credit report
- Credit history
- Derogatory credit
- Employment history
- Other aspects of the mortgage loan borrowers information into account
- AUS will either issue an approve/eligible, refer/eligible. or refer/ineligible
- The AUS will determine how many years tax returns is required
- AUS will also determine whether borrower needs verification of rent
- The AUS will also take into account gift funds for down payment
- AUS may even reject a borrower with good credit and good income but has limited assets
If I get A Fannie Mae Automated Underwriting System Approval, Am I Assured A Mortgage Loan Approval?
Many mortgage lenders have their own internal overlays.
- Overlays are additional requirements on top of the Fannie Mae Automated Underwriting System approval
- However, lenders with no overlays like Gustan Cho Associates will just go off Fannie Mae Automated Underwriting System approval
- This holds true as long as the borrower can meet the conditions stated on AUS
- With lenders with no overlays, formal mortgage approval and a clear to close will be issued if borrowers meet the conditions on the AUS Approval
Borrowers who are interested in applying for a mortgage loan with a lender with no lender overlays, please contact Gustan Cho at 262-716-8151 or text for faster response. Or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays. We are direct lenders with no lender overlays on government and conventional loans and just go off Automated Underwriting System (AUS) Findings.