How To Get Refer To Approve-Eligible Per AUS To Qualify For Mortgage

Gustan Cho Associates
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This BLOG On How To Get Refer To Approve-Eligible Per AUS To Qualify For Mortgage Was UPDATED On May 30th, 2019

How To Get Refer To Approve-Eligible Per AUS
GCA Mortgage News

There are two types of mortgage guidelines:

  1. Agency Guidelines (AUS Approval)
  2. Lender Overlays

Gustan Cho Associates Mortgage Group has no overlays on government and conventional loans.

  • GCA Mortgage Group just goes by agency guidelines which are the automated underwriting system findings
  • Most other lenders need to meet agency guidelines but may have lending requirements of their own
  • However, lenders with overlays require to meet the minimum agency guidelines
  • They need to submit mortgage applicant through AUS
  • After they get their AUS approve/eligible per findings, they need to then need to see if the mortgage applicant meets their own lending requirements which are called mortgage overlays

At Gustan Cho Associates Mortgage Group, we only need to get an approve/eligible per AUS Findings and not worry about the second step, which is overlays since we do not have any.

How Automated Underwriting System Works

How Automated Underwriting System Works

Every lender needs to submit a mortgage application to either Fannie Mae or Freddie Mac Automated Underwriting System, also referred as AUS on all loan programs. Whether it is FHA, VA, USDA, Conventional Loans, to proceed with the mortgage process, the Automated Underwriting System needs to render an approve/eligible per AUS Findings.

Here are the three findings AUS yields:

  • Approve/Elgible
    • Means that AUS renders an automated approval where if all information entered on 1003, the credit report is correct, the loan has an automated approval
  • Refer/Eligible
    • Means that AUS cannot render an automated approval but may qualify for a manual underwrite
  • Refer/With Caution
    • The borrower does not qualify with how AUS is reading the 1003 and credit report

What Does Refer-Eligible Per AUS Mean?

What Does Refer-Eligible Per AUS Mean?

Refer-Eligible per AUS Findings means that the Automated Underwriting System cannot render automated approval.

  • The file needs to be downgraded to a manual underwriting
  • FHA and VA Home Loans allow manual underwriting
  • VA Manual Underwriting Guidelines are the same as HUD Manual Underwriting Guidelines
  • Conventional Loans do not. Nothing is wrong with manual underwriting with FHA and VA Home Mortgages
  • However, before downgrading the file to manual underwriting, loan officers should do everything possible to get the file an approve-eligible per AUS

Ways On How To Get Refer To Approve-Eligible Per AUS

Gustan Cho Associates
Gustan Cho Associates

The Automated Underwriting System (AUS) is an intricate sophisticated state of the art computer system that analyzes all information about borrowers income/credit/disclosures and renders an automated decision within seconds after submission.

  • AUS will only read the information that is on the 1003 and borrowers credit report
  • If credit reports are inaccurate, then AUS will pick up the inaccurate report
  • Credit Disputes on credit reports are not allowed during the mortgage process
  • This because credit disputes automatically discount the derogatory tradelines from the credit scoring model of credit bureaus
  • AUS does not recognize this
  • So any automated findings with credit disputes are not valid
  • Same with public records
  • If borrowers have public records such as bankruptcies and foreclosures that is not reporting on credit reports, AUS will not recognize that and will render an approve/eligible when the borrower is not qualified

All loan officers should not give up and just take a refer/eligible. Loan Officers can run AUS Findings many times. There are ways on how to get refer to approve-eligible per AUS.  We will explain how to get refer to approve-eligible per AUS on this blog. This blog is intended for both borrowers and loan officers.

Gift Funds Is One Way On How To Get Refer To Approve-Eligible Per AUS

Gift Funds Is One Way On How To Get Refer To Approve-Eligible Per AUS

Gift funds are allowed, especially on FHA Loans. HUD Guidelines On Gift Funds allow 100% gifted funds for the down payment.

  • However, Automated Underwriting System and lenders do not view gifted funds for down payment favorably
  • This holds trues especially for borrowers with under 620 credit scores
  • There are many cases where borrowers  with 100% gifted funds will get a refer-eligible per AUS Findings
  • But if the loan officer changes the gift funds to borrowers own funds, the AUS system will render an approve-eligible per AUS.

If the loan officer gets a refer-eligible per AUS, one way on how to get refer to approve-eligible per AUS would be removing gift funds and entering own funds.

Larger Down Payment Is Another Solution On How To Get Refer To Approve-Eligible Per AUS

Gustan Cho Associates
Gustan Cho Associates

Another way on how to get refer to approve-eligible per AUS is more skin in the game by borrowers.

  • A larger down payment is a great compensating factor
  • If a borrower with 580 credit score gets a refer-eligible per AUS on an FHA Home Loan with 3.5% down payment, try putting 5% to 10% down payment
  • The larger the down payment the fewer risk lenders have so AUS will find it more favorable
  • On refer automated finding, a larger down payment may be how to get refer to approve-eligible per AUS

Adding Reserves May Be Potential Solution On How To Get Refer To Approve-Eligible Per AUS

Adding Reserves May Be Potential Solution On How To Get Refer To Approve-Eligible Per AUS

Borrowers who get refer automated findings may try adding reserves and see if loan officer can trigger that refer to approve-eligible per AUS.

  • Many times one months or more in PITI does wonders and is a great solution on how to get refer to approve-eligible per AUS
  • This holds true for borrowers with under 620 credit scores, higher debt to income ratios, and substantial outstanding collections and charged off accounts

Lower Debt To Income Ratios

Gustan Cho Associates
Gustan Cho Associates

Borrowers with higher debt to income ratios and lower scores will often get refer-eligible findings on AUS.

  • By lowering debt to income ratios by paying down or off debts or buying down rates with points may be another solution on how to get refer to approve-eligible per AUS
  • Shopping to get the lowest possible homeowners insurance premium will lower debt to income ratios
  • May want to explore the possibility with going with 7/1 ARM versus 30-year fixed rate mortgage
  • Adjustable Rate Mortgages have lower mortgage rates than fixed-rate mortgages

There are many tricks on how to get refer to approve-eligible per AUS to cover on this blog. Every situation is different. To qualify and start the pre-approval process with a direct lender with no overlays, please contact us at GCA Mortgage Group at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. Our team of licensed and support staff are available 7 days a week, evenings, weekends, and holidays.

3 Comments
  1. Bianca says

    Very informative post thank you.

    1. Gustan Cho, NMLS 873293 says

      You are very welcome Bianca. Feel free and join our GCA Mortgage News Forum and post your answers to our viewers questions. We promote multiple answers to every question. You can post your name and contact information. Here is the link http://forum.gustancho.com/

    2. Gustan Cho, NMLS 873293 says

      Welcome to Gustan Cho Associates Mortgage Group Bianca.

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