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This blog delves into the guidelines for manual underwriting with late payments concerning VA and FHA loans. To qualify for manual underwriting on FHA and VA loans, timely payments within the past 24 months are imperative.

Gustan Cho Associates may consider exceptions for borrowers with one or two late payments within the past 24 months, provided extenuating circumstances are beyond their control. This leniency is particularly notable in VA loans compared to FHA loans. Documentation of extenuating circumstances, such as hospital and medical records, is necessary. The article will thoroughly explore manual underwriting with late payments within the past 24 months for FHA and VA loans.

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Mortgage Programs That Allow Manual Underwriting

Manual underwriting with late payments is permitted for FHA and VA loans.

Individuals who cannot obtain approve/eligible through the automated underwriting system (AUS) still have the opportunity to qualify through manual underwriting. To be eligible for manual underwriting with FHA and VA loans, borrowers must receive a refer/eligible status from the AUS.

Do All Lenders Do Manual Underwriting?

It’s uncommon for lenders to engage in Manual Underwriting With Late Payments, where borrowers must have made timely payments in the previous 24 months. However, Gustan Cho Associates offers this service, provided borrowers can demonstrate extenuating circumstances. This blog will explore the FHA and VA Manual Underwriting With Late Payments Mortgage Guidelines.

FHA And VA Manual Underwriting Guidelines

The FHA and VA guidelines for manual underwriting closely resemble each other. In cases where the automated underwriting system designates a file as refer/eligible for FHA or VA loans, it can be reassigned for manual underwriting.

Manual underwriting is not a service offered by all lenders. Gustan Cho Associates stands out among national lenders for its lack of overlays and expertise in VA and FHA manual underwriting. Files approved through manual underwriting are as valid as those approved through automated processes.

How Mortgage Underwriters Review Manual Underwriting Borrowers

The mortgage underwriter meticulously reviews the file, conducting manual underwriting with a meticulous eye. They ensure that borrowers satisfy all the mortgage guidelines mandated by HUD and VA.

Most lenders prohibit Manual Underwriting With Late Payments, typically disallowing any late payments within the preceding 24 months.

Timely Payments After Bankruptcy and Foreclosure

There are no late payments after bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale.

The great news is Gustan Cho Associates will allow Manual Underwriting With Late Payments if it is just one or two late payments in the past 24 months. Borrowers will need proof they had extenuating circumstances.

How Does The Automated Underwriting System Work?

The automated underwriting system (AUS) is an intricate, sophisticated system residential mortgage lenders use on all loan applications. Loan officers will enter borrowers’ data, credit, and income profiles into the automated underwriting system. Here are the steps in the mortgage underwriting process. The automated underwriting system will render the following decision:

• Approve/Eligible
• Refer/Eligible
• Refer/Caution

Approve/Eligible means borrowers got an automated approval. Refer/eligible means that AUS cannot decide and needs to be downgraded to manual underwriting, where a human underwriter needs to underwrite the file. Refer with caution means a denial.

Types of Automated Underwriting Systems

There are two types of automated underwriting systems. Fannie Mae’s Desktop Underwriter (DU) or Desktop Originator (DO) is more commonly used by lenders.

The second AUS used is Freddie Mac’s Loan Prospector (LP). Sometimes, borrowers may not get a Fannie Mae AUS approval but may get a Freddie Mac AUS Approval. Not all lenders are Freddie Mac Approved. Gustan Cho Associates are both Fannie Mae and Freddie Mac-approved lenders.

General FHA and VA Manual Underwriting Guidelines

FHA and VA Manual Underwriting Guidelines are very similar. VA does not have a maximum DTI cap on automated approvals. The maximum debt-to-income ratio on VA Loans is 41% DTI is on manual underwrites with no compensating factors.

Debt-to-income ratios can go as high as 55% on VA manual underwrites with two or more compensating factors. HUD allows 31/41 DTI with no compensating factors. 37/47 with one compensating factor. 40/50 DTI with two compensating factors. Timely payments in the past 24 months

Pre-Qualify For An FHA Or VA Loan Today, Click Here.

Manual Underwriting With Late Payments: Importance of Low Payment Shock

In general, verification of rent is required on all manual underwrites. Gustan Cho Associates will exempt rental verification if the borrower lives rent-free with a family member. The rent-free letter will be provided by Gustan Cho Associates that needs to be completed by a family member living rent-free with the borrower.

The Importance of Timely Payments in the Past 24 Months on Manual Underwriting

Timely payments in the past 24 months with no late payments. One month’s reserves for one and two-unit properties three and four-unit properties require three months’ reserves.

Reserves are one month of principal, interest, taxes, and principal (PITI). Reserves cannot be gifted. It needs to be the borrowers’ own funds. Compensating factors are important for borrowers with late payments in the past 24 months or those with a high debt-to-income ratio.

Manual Underwriting With Late Payments: Importance of Compensating Factors

Compensating factors play an important role for borrowers with late payments in the past 24 months and those with high debt-to-income ratios. The following factors are considered compensating factors by mortgage underwriters:

• Larger down payment
• Three or more months of reserves
• Part-time income or other income that has been seasoned for 12 months or more but not used to qualify for an income
• History of job promotions and the borrower getting more training and education to further their career.
• History of saving money and lower credit utilization ratio on revolving accounts
• The working spouse who is not on the loan
• Job longevity on the same job and same field of employment

Manual Underwriting With Late Payments: FHA And VA Guidelines after Bankruptcy and Housing Event

Homebuyers can qualify for FHA and VA loans after bankruptcy, foreclosure, deed in-lieu-of foreclosure, or short sale. There is a mandatory waiting period to qualify.

HUD requires a two-year waiting period after Chapter 7 Bankruptcy to qualify for FHA loans. HUD mandates a three-year waiting period after foreclosure, deed in lieu, and short sale to qualify for FHA loans.

VA Manual Underwriting Guidelines

VA requires a two-year waiting period after Chapter 7 Bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale to qualify for VA loans. Homebuyers can qualify for VA and FHA loans during the Chapter 13 Bankruptcy repayment plan via manual underwriting. Need trustee approval. Chapter 13 Bankruptcy does not need to be discharged.

There is no waiting period to qualify for VA and FHA loans after the Chapter 13 Bankruptcy discharge date. Any FHA and VA loans without a two-year seasoning after the Chapter 13 Bankruptcy discharge date must be manually underwritten.

Qualifying For VA And FHA Manual Underwriting With Late Payments

Manual Underwriting With Late Payments is possible if borrowers have extenuating circumstances. Borrowers who died in the family, had major health issues, or suffered job loss can potentially qualify for VA and FHA Manual Underwriting With Late Payments. Please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response to discuss your case scenario. Or email us at alex@gustancho.com.  The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.

FAQs: Manual Underwriting With Late Payments Mortgage Guidelines

1. What is the significance of timely payments for manual underwriting with late payments on FHA and VA loans? To qualify for manual underwriting on FHA and VA loans, borrowers must have made timely payments within the past 24 months. This requirement is imperative for eligibility.

2. Are exceptions made for borrowers with late payments within the past 24 months? Gustan Cho Associates may consider exceptions for borrowers with one or two late payments within the past 24 months, provided they can demonstrate extenuating circumstances beyond their control. Documentation of such circumstances, like hospital or medical records, is necessary.

3. How does manual underwriting with late payments differ between VA and FHA loans? While both FHA and VA loans allow manual underwriting with late payments, VA loans tend to offer more leniency in such cases compared to FHA loans. However, borrowers must still adhere to specific documentation requirements and lender policies.

4. Do all lenders offer manual underwriting with late payments? No, it’s uncommon for lenders to engage in manual underwriting with late payments. Gustan Cho Associates stands out for offering this service, particularly for FHA and VA loans, with considerations for extenuating circumstances.

5. How do mortgage underwriters review manual underwriting borrowers? Mortgage underwriters meticulously review files, ensuring borrowers meet all mortgage guidelines. Most lenders disallow manual underwriting with late payments, typically within the preceding 24 months.

6. What are compensating factors, and why are they important? Compensating factors play a crucial role for borrowers with late payments or high debt-to-income ratios. These factors include a larger down payment, substantial reserves, job stability, and other financial strengths that offset perceived risks.

7. What are the waiting periods after bankruptcy or foreclosure to qualify for FHA and VA loans? For FHA loans, HUD mandates a two-year waiting period after Chapter 7 bankruptcy and a three-year waiting period after foreclosure, deed in lieu, or short sale. VA loans typically require a two-year waiting period for similar events.

8. How can borrowers qualify for manual underwriting with late payments due to extenuating circumstances? Borrowers facing extenuating circumstances such as family deaths, major health issues, or job loss may potentially qualify for manual underwriting with late payments. Contact Gustan Cho Associates to discuss individual case scenarios and eligibility.

9. What steps should borrowers take to apply for manual underwriting with late payments? To explore eligibility for manual underwriting with late payments, borrowers can reach out to Gustan Cho Associates via phone, text, or email. The team is available seven days a week to assist with inquiries and provide guidance on the application process.

Click Here To Qualify For A Mortgage With Late Payments

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