Manual Underwriting Versus Automated Underwriting Guidelines

Manual Underwriting Versus Automated Underwriting Guidelines

This BLOG On Manual Underwriting Versus Automated Underwriting Guidelines Was UPDATED On September 22nd, 2018

The Automated Underwriting System is a sophisticated computer system that will render a decision on whether a mortgage applicant is approved for a mortgage loan based on the information from the 1003 and credit reports.

  • The Automated Underwriting System will take into account the mortgage applicants following information:
    • Income
    • Debt
    • Liabilities
    • Assets
    • Credit scores
    • Credit history
    • Public Records
  • Based on the information, the Automated Underwriting System will report its findings and can require conditions like the following:
    • Rental verification
    • Reserves
    • Assets
    • Whether or not gift funds can be used
    • Other mortgage conditions
  • Fannie Mae’s version of Automated Underwriting System is known as DU and Freddie Mac’s version is known as LP
  • Findings from the Automated Underwriting System are rendered as approve eligible, refer eligible, or refer with caution

Difference Between Manual Underwriting Versus Automated Underwriting Is Approve/Eligible Per AUS Findings

Manual Underwriting Versus Automated Underwriting  is the Approve/Eligible is rendered on automated underwriting and refer/eligible is rendered on manual underwriting.

  • Refer eligible files are mortgage applications that is eligible for mortgage approval but is not approved due to certain factors that the automated underwriting system cannot render an automated approval
  • A mortgage underwriter needs to carefully review the borrowers file manually
  • Information such as the following needs to be reviewed carefully and analyzed by the underwriter:
    • Credit Scores
    • Overall Credit Payment History
    • Assets
    • Debt to income ratios
    • Compensating Factors
    • Other factors that the automated underwriting system cannot render an approve/eligible per AUS
  • Refer with caution pretty much means a denial due to certain factors that do not meet Fannie Mae, Freddie Mac, or FHA mortgage lending guidelines such as the following:
    • Borrower not having met the mandatory waiting period after a housing event )foreclosure, deed in lieu of foreclosure, short sale)
    • Did not meet mandatory waiting period after Chapter 7 bankruptcy
    • Other factors that the Automated Underwriting System picked up
  • For files that do not meet automated underwriting system guidelines, the files can be manually underwritten

Manual Underwriting Needs To Go Through Lender Who Does Manual Underwrites

Not all mortgage lenders can do manual underwriting mortgage applications. The Gustan Cho Team at Loan Cabin Inc. is a direct mortgage lender with no overlays on government and conventional loans that are experts in manual underwriting:

  • For those that do, there are more restrictions that apply than automated approved mortgage files
  • Manual underwriting is done for files that cannot get automated underwriting system automated approvals
  • Manual underwriters look for strong compensating factors such as rental verification, reserves, larger down payment,  and lower debt to income ratios
  • Manual underwriting maximum debt to income caps can be as high as 50% DTI with compensating factors
  • For mortgage loan borrowers with no credit scores, a manual underwriting mortgage approval process can get them a mortgage approval by using non traditional credit such as the following:
    • Rental verification
    • Electric bills
    • Water bills
    • Cable bills
    • Internet bills
    • Cellular bills
    • Insurance bills
    • Tuition
    • Other alternative sources
  • The way to prove that is by providing the mortgage underwriter 12 months worth of cancelled checks

VA And FHA Loans During And After Chapter 13 Bankruptcy

Gustan Cho Associates Mortgage Group is a direct lender with no lender overlays on government and conventional loans.

  • A large percentage of our borrowers are folks who are in a Chapter 13 Bankruptcy repayment plan and/or just got their Chapter 13 Bankruptcy discharged
  • Most mortgage lenders have overlays on VA Loans During And After Chapter 13 Bankruptcy and FHA Loans During And After Chapter 13 Bankruptcy
  • The Gustan Cho Team at Loan Cabin Inc. has no lender overlays on Chapter 13 Bankruptcy during and after Chapter 13 Bankruptcy discharge on both FHA and VA Loan Programs
  • Both FHA and VA Loans without two years of seasoning after Chapter 13 Bankruptcy discharged date need to be manually underwritten because the Automated Underwriting System will not render an approve/eligible per AUS

Qualifying For Mortgage With Direct Lender With No Overlays

Borrowers who need to qualify for mortgage with direct lender with no lender overlays on government and conventional loans can contact The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays. A large percentage of our borrowers are files that need to be manually underwritten. All of our pre-approvals are TBD Subject Property Mortgage Underwriting so they are full credit approvals that is fully underwritten and signed off by our mortgage underwriters.

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