How to Turn Refer/Eligible Into Approve/Eligible in AUS

How to Turn Refer/Eligible Into Approve/Eligible in AUS

In this guide, we will cover and discuss how to get refer to approve-eligible per AUS approval. One of the most frequently asked questions at Gustan Cho Associates is how to get refer to approve-eligible per AUS. Experienced loan officers can play around with the automated underwriting system (AUS) where they can get a refer/eligible file to an AUS approval.

Each AUS submission must contain accurate and complete information about the borrower. Fannie Mae, in particular, strongly advises lenders who receive a Refer with Caution result to review the application for accuracy, correct submitted data, and resubmit the file.

They may need to add more down payment, add a non-occupant co-borrower, withdraw gift funds, add more reserves, pay off collections and/or charged-off accounts, or lower the loan amount. In this blog, we will go over how to get refer to approve-eligible per AUS approval.

What Does Refer/Eligible per Automated Underwriting System Mean?

When the automated underwriting system (AUS) renders a refer/eligible automated findings, it means the mortgage loan applicant is most likely eligible to qualify for the loan program entered, but the AUS is not able to determine whether it can render an automated approval. The AUS is referring the file for a manual underwrite by a human mortgage underwriter to confirm the borrower is eligible.

The Three Automated Findings from AUS

The automated underwriting system (AUS) provides three main types of findings:

1. Approve/Eligible per Automated Underwriting System: The file has received automated approval, meaning the application is in good standing and can proceed.
2. Refer-Eligible per Automated Underwriting System: This finding means that while the automated system determines the mortgage loan applicant is eligible, it cannot issue an automated approval. As a result, the application requires manual underwriting for further assessment.
3. Refer with Caution: This indicates that the automated underwriting system suggests against approval, meaning the borrower does not qualify for a mortgage.

It’s important to remember that only FHA and VA loans allow for manual underwriting. The following sections will explore how manual underwriting works in more detail.

Can Loan Officers Have a Refer/Eligible File to an Approve/Eligible per Automated Underwriting System?

This is one common inquiry received by the Gustan Cho Associates team is about the process of obtaining a refer to approve-eligible status through AUS approval, enabling borrowers to qualify for a mortgage. There are methods for transitioning a refer/eligible outcome in the automated underwriting system (AUS) to an approve/eligible status. Loan officers have the option to experiment and persist in their efforts to convert a referred/eligible result into an approved/eligible finding from the automated underwriting system.

Lender Overlays on Refer-Eligible Per Automated Underwriting System Findings

Borrowers with outcomes flagged as refer-eligible by automated underwriting systems may have trouble getting approved by most banks or mortgage companies. Manual underwriting can be an option if a mortgage loan file is marked as refer-eligible. Not all lenders use manual underwriting, but it involves following specific guidelines. Underwriters look at compensating positive factors that can help the borrowers during manual underwriting.

Importance of Compensating Factors on Manual Underwriting.

Compensating factors are elements that can mitigate risk for lenders when evaluating a borrower’s mortgage application.

An example of a compensating factor is payment shock. Iff you’re moving from paying $800 in rent to a mortgage payment of $850, this small increase is viewed as less risky. Lenders appreciate that the jump is manageable, suggesting you can handle the new payment.

Another significant factor is a larger down payment. If you’re purchasing a $300,000 home and can provide a $60,000 down payment rather than just the minimum of $30,000, that additional equity indicates a stronger commitment. This suggests to lenders that you are less likely to default because you have more invested in the property from the beginning. Having savings to cover several months of mortgage payments is very important. For example, if your monthly mortgage payment is $1,000, saving $3,000 shows you can handle payment changes better. This can also give lenders confidence in your financial stability. In essence, these compensating factors help lenders feel more secure in lending you money by demonstrating that you are financially responsible and capable of handling your mortgage payments.

How To Get Refer To Approve-Eligible Per AUS?

Different Loan Programs Use Separate AUS Platforms, Each with its Own Underwriting Methods and Terminology.

• Fannie Mae uses Desktop Underwriter, or DU.
• Freddie Mac uses Loan Product Advisor, or LPA.
• FHA uses the TOTAL Mortgage Scorecard via an approved AUS.
• USDA uses the Guaranteed Underwriting System, or GUS.
• Loans backed by the VA may be processed using an Approved AUS, but the VA Underwriter is still responsible for assessing the loan to determine whether it is a reasonable credit risk.

What Is the Automated Underwriting System?

The AUS is a complex, sophisticated, and highly technical computer system, almost like it possesses its intelligence. Fueled by cutting-edge artificial intelligence technology, this automated underwriting system swiftly reaches a decision on a borrower within seconds. It meticulously examines the borrower’s credit, scores, payment history, derogatory items, public records, assets, income, and liabilities in a matter of seconds before delivering its verdict. This article will delve into the process of obtaining a refer/eligible status for automated approval.

Refer-Eligible Per Automated Underwriting System Versus Approve Eligible Per AUS

Borrowers can get the Automated Underwriting System (AUS) approval if they meet the minimum federal mortgage guidelines. In an FHA loan scenario, if a borrower receives a refer-eligible per automated underwriting system status, their application will require manual underwriting. In order to be eligible for a 3.5% down payment, borrowers must have a credit score of no less than 580. If a borrower’s credit score falls below 620, the maximum allowable debt-to-income ratio may be reduced to 43% because of potential risks flagged by the AUS.

Gift Fund Guidelines on Refer-Eligible Per Automated Underwriting System Findings

Using gift funds for a down payment can make it harder to get approved for an FHA mortgage. Here’s why it might be better not to use it:

1. Financial Stability: Relying on gifted funds may signal financial instability. Not using them shows a stronger financial position.
2. Lower Risk: Gifted funds can complicate the application process. Removing them simplifies the review and lowers risk, leading to better AUS results.
3. Credit Image: Without gifted funds, borrowers appear more financially independent, which can ease concerns about credit history or scores.
4. Easier Approval: A simpler application helps AUS issue approve-eligible status instead of refer-eligible, which needs extra review.

In summary, not using gifted funds can streamline the approval process.

Types of Mortgage Programs and Guidelines

There Are Two Types of Mortgage Guidelines:

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

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

Can One Lender Deny You and Another Approve You?

Lenders vary in their criteria for government and conventional loans. While multiple lenders may offer similar mortgage loan programs, their mortgage guidelines can differ. It’s important to note that being denied a mortgage by one lender does not necessarily imply rejection by another. This principle applies regardless of whether the mortgage loans in question are government-backed or conforming loans.

Can I Apply for Another Mortgage After Being Denied?

Lenders with overlays must adhere to the minimum agency guidelines, requiring them to submit mortgage applicants through an Automated Underwriting System (AUS). Following the AUS approval/eligible per findings, they must then assess whether the mortgage applicant meets their specific lending requirements, known as mortgage overlays.

At Gustan Cho Associates Mortgage Group, our process only involves obtaining an approve/eligible per AUS Findings. However, the team at Gustan Cho Associates are experts on FHA and VA manual underwriting borrowers.

Borrowers at Gustan Cho Associates can rest assured that they do not need to be concerned about the second step, which involves overlays, as we do not have any. This article will delve into the process of obtaining a Refer to Approve-Eligible per AUS to qualify for a mortgage. Get approve /eligible for purchase your dream home, click here

How Automated Underwriting System Works

All lenders are required to send a mortgage application through the Automated Underwriting System (AUS) of either Fannie Mae or Freddie Mac for all loan programs, including FHA, VA, USDA, or Conventional loans. To advance in the mortgage process, the Automated Underwriting System must generate an approve/eligible status based on AUS Findings. Nevertheless, there are instances when the automated underwriting system does not provide an approve/eligible outcome.

How Long Does It Take for an Automated Findings from the Automated Underwriting System

The automated underwriting system is an advanced computerized system with sophisticated technology. It evaluates the borrower’s 1003 mortgage applications, tri-merger credit reports, and all data from the 1003 and loan applications. In a matter of seconds, the automated underwriting system provides a decision, which can be an approval, a referral to manual underwriting, or a denial referred to as refer/ineligible per AUS.

Findings from the Automated Underwriting System

Here Are the Three Findings AUS Yields Three Types of Findings:  

The Automated Underwriting System, commonly referred to as the AUS, will render three types of findings. To get automated underwriting system finding, the borrower’s complete loan application and tri-merger credit report needs to be inputted. Within seconds, the automated underwriting system will render the following findings:

Approve/Eligible:

• Approve/Eligible per AUS means that the AUS renders an automated approval where if all information entered in 1003, the credit report is correct, the loan has an automated approval

Refer/Eligible:

• Refer/Eligible per AUS means that the 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

Qualify for you mortgage loan fast, click here

For FHA and VA Cases Submitted Through DU, Findings May Include Refer/Eligible or Refer/Ineligible.

What Does Refer-Eligible Per AUS Mean?

Being classified as Refer-Eligible based on AUS Findings indicates that the Automated Underwriting System is unable to provide automated approval. Consequently, the application must be shifted to manual underwriting. Both FHA and VA Home Loans permit manual underwriting, and the guidelines for VA Manual Underwriting align with those of HUD Manual Underwriting. This is not the case for Conventional Loans. Engaging in manual underwriting for FHA and VA Home Mortgages is acceptable and should not raise concerns. Nonetheless, before resorting to manual underwriting, loan officers are encouraged to exhaust all efforts to achieve an approve-eligible status through AUS.

Solution on How To Get Refer To Approve-Eligible Per AUS

The Automated Underwriting System (AUS) is a highly advanced and intricate computer system designed to analyze all relevant information regarding borrowers’ income, credit, and disclosures. It efficiently delivers an automated decision within seconds of receiving the submission. AUS specifically focuses on the data provided in the 1003 form and the borrowers’ credit report. In cases where credit reports contain inaccuracies, the AUS is programmed to detect and address these inaccuracies.

Credit Disputes During The Mortgage Process Will Halt The Underwriting Process

During the mortgage process, it is not permissible to initiate credit disputes on credit reports. This restriction is in place because credit disputes automatically exclude derogatory tradelines from the credit scoring model used by credit bureaus.

Automated Underwriting Systems (AUS) do not acknowledge this exclusion, rendering any automated findings involving credit disputes invalid.

The same principle applies to public records; if borrowers have bankruptcies and foreclosures not reflected on their credit reports, AUS will not recognize them, potentially resulting in an approve/eligible status when the borrower is not qualified.

What Will a Loan Officer Use To Determine If You Will Be Pre-Approved For a Mortgage?

Loan officers must conduct a comprehensive qualification of borrowers before issuing pre-approval letters, as the pre-approval stage holds paramount importance in the mortgage process.

Hasty pre-approvals, without adequately qualifying borrowers, can lead to stress throughout the mortgage procedure. The qualification process should be meticulous, ensuring no steps are overlooked.

In cases where borrowers receive a refer/eligible status per AUS, loan officers should make diligent efforts to obtain an approve/eligible status per AUS. Loan officers can perform AUS Findings multiple times, exploring ways to transition from a refer to an approve-eligible status per AUS. This guide aims to elucidate the process of achieving refer to approve-eligible status per AUS and is designed for both borrowers and loan officers.

Gift Funds is One Way on How to Get Refer to Approve-Eligible Per AUS

Gift funds are allowed, particularly in the case of FHA Loans. HUD Guidelines regarding Gift Funds permit the use of 100% gifted funds for the down payment. Nevertheless, Automated Underwriting Systems and lenders generally do not view down payment funds in the form of gifts favorably, especially when dealing with borrowers whose credit scores are below 620.

Gift funds can be used when allowed. But the AUS will fully check the risk. Factors like credit profile, debt ratio, and payment history affect the AUS recommendation. Replacing gift funds with personal money will not improve the AUS result.

Instances exist where borrowers relying on 100% gifted funds may receive a refer-eligible result based on AUS Findings. However, by substituting the gift funds with the borrower’s own funds, the AUS system is more likely to yield an approve-eligible outcome. If a loan officer encounters a refer-eligible determination through AUS, one approach to shift it to an approve-eligible status is to eliminate gift funds and input the borrower’s personal funds. Click here for HUD guidelines regrading gift funds for down payment

A Larger Down Payment Is a Solution to Get Refer to Approve-Eligible Per AUS

Another way how to get referred to as 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 a 580 credit score gets a refer-eligible per AUS on an FHA Home Loan with a 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 can be a way how to get refer to approve-eligible per AUS.

Adding Reserves May Be Solution on How to Get Refer to Approve-Eligible Per AUS

Borrowers receiving automated findings that indicate a referral may consider supplementing their application with reserves. By doing so, they can collaborate with the loan officer to potentially transition the referral into an approval-eligible status as per Automated Underwriting System (AUS) criteria.

Documented reserves may improve the risk profile, but the required amount and impact on AUS depend on the full application. One month of reserves does not guarantee an Approve/Eligible result.

In numerous instances, having reserves equivalent to at least one month’s worth of Principal, Interest, Taxes, and Insurance (PITI) proves highly effective and serves as a viable strategy for obtaining approval following a referral from the AUS. This strategy is particularly beneficial for borrowers with credit scores below 620, higher debt-to-income ratios, and significant outstanding collections and charged-off accounts.

Refer to AUS Approval By Lowering Debt-to-Income Ratio 

Borrowers who have elevated debt-to-income ratios and lower credit scores frequently receive refer-eligible findings on Automated Underwriting Systems (AUS). One potential strategy for obtaining an approve-eligible result from AUS is to reduce debt-to-income ratios either by paying off existing debts or by using points to lower interest rates.

Another approach is to actively seek the most competitive homeowners insurance premium to decrease overall debt-to-income ratios.

Additionally, considering the option of a 7/1 Adjustable Rate Mortgage (ARM) instead of a 30-year fixed-rate mortgage may be worthwhile, as ARMs typically offer lower mortgage rates compared to their fixed-rate counterparts.

Final Thoughts 

The assessment is usually quick, but the results can vary depending on the loan details. If the AUS recommends a loan for approval, some credit, income, and asset guidelines may not need to be reviewed.

How Do You Make Sure You Get Approved for a Mortgage

There are many tricks on how to get refer to approve-eligible per AUS to cover in 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 Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Our team of licensed and support staff at Gustan Cho Associates are available 7 days a week, on evenings, weekends, and holidays.

This blog about “Refer-Eligible Per Automated Underwriting System Findings” was updated on May 1st, 2025.