Manual Underwriting With Extenuating Circumstances

Manual Underwriting With Extenuating Circumstances: 2025 Guide to Mortgage Approval

Buying a home can feel impossible when you’ve had tough times, like losing your job, facing a medical emergency, or going through a bankruptcy. If a lender told you “no,” don’t give up. You may still qualify for a mortgage through manual underwriting with extenuating circumstances.

At Gustan Cho Associates, we specialize in helping borrowers who don’t meet standard guidelines get approved when other lenders say it can’t be done.

This guide explains how manual underwriting with extenuating circumstances works in 2025, what documents you need, and how to get started today.

What Is Manual Underwriting?

Most lenders today use automated systems to decide if you qualify for a mortgage. These systems examine your credit score, debts, income, and past payment history. But if something happened in your life—like a layoff or a health issue—that hurt your credit, an automated system may reject your loan.

That’s where manual underwriting with extenuating circumstances comes in. Instead of a computer, a real person (an underwriter) reviews your full story. They look at how you recovered from past financial trouble, not just your credit score.

What Counts as an Extenuating Circumstance?

An extenuating circumstance is a major life event that caused financial hardship but was mostly outside your control. Here are common examples:

• Medical emergencies or long-term illness
• Death of a spouse or close family member
• Natural disasters like hurricanes, fires, or floods
• Sudden job loss or business failure
• A divorce that caused financial strain

Underwriters want to see that the event was temporary and that you’ve regained financial stability.

How Do You Prove Extenuating Circumstances?

You must document what happened to qualify for manual underwriting with extenuating circumstances. Be honest and thorough.

Documents may include:

• Medical bills or hospital records
• Death certificates
• Layoff notices or unemployment benefits
• Police reports or insurance claims for accidents
• Divorce decrees and court orders

You’ll also need a letter of explanation (LOX). This is a short letter where you explain what happened, when it happened, and how your situation has improved.

FHA Manual Underwriting Guidelines With Extenuating Circumstances

In 2025, FHA loans still allow manual underwriting. Some lenders avoid it, but Gustan Cho Associates welcomes these files.

For FHA loans with manual underwriting:

• Minimum credit score: 500 (with 10% down) or 580 (with 3.5% down)
• Debt-to-income ratio (DTI): Max 31/43, 37/47, or 40/50 depending on compensating factors
• At least one year of clean payment history (no recent late payments)
• Two or three credit tradelines preferred

If your file shows extenuating circumstances and you meet these guidelines, you could be approved manually—even if you’ve been denied elsewhere.

VA Manual Underwriting With Extenuating Circumstances: Low Credit Score Success

In a recent case, we assisted a veteran in securing a VA loan despite her credit score being as low as 512. She had experienced two car accidents that resulted in hospital stays, which prevented her from making timely payments on her car loans. Consequently, these missed payments negatively impacted her credit, leading to a decline in her score.

The veteran provided essential documentation to support her loan application, including police reports from the accidents, insurance paperwork, and hospital records. This evidence helped illustrate her circumstances and demonstrated her commitment to overcoming her challenges, ultimately enabling her to close the loan successfully.

Even though her credit score was low, our underwriter saw the bigger picture. Her debt-to-income ratio was low, she had mortgage reserves, and her job was stable. We closed the loan in under 30 days.

This is the power of manual underwriting with extenuating circumstances when done right.

What If You Had Late Payments After Bankruptcy?

Most lenders will deny your loan if you have had a late payment after a bankruptcy discharge. But not all late payments are equal. In another case, a client had a 30-day late payment after a Chapter 13 bankruptcy was discharged.

She paid on the 30th, but it was posted a day late. To support her case, she provided a bank statement showing that the payment was made on time, a letter of explanation, and evidence of her overall good credit history since her discharge.

Our underwriter approved the loan using common sense—another reason to work with Gustan Cho Associates, where manual underwriting with extenuating circumstances is welcomed.

What Documents Do I Need for Manual Underwriting Approval?

Be ready to provide:

• Two years of tax returns (unless using non-traditional income)
• Two months of bank statements
• Pay stubs from the past 30 days
• Proof of reserves (savings after closing)
• A letter of explanation for any late payments or derogatory credit
• Documentation for extenuating circumstances

We’ll review everything and help you get organized before your file goes to underwriting.

How to Write a Strong Letter of Explanation for Manual Underwriting

A Letter of Explanation (LOX) should include:

1. What happened?
2. When did it happen?
3. How did it affect your finances?
4. What have you done to fix your situation?
5. Why are you financially stable now?

Make it short, honest, and easy to understand. Don’t blame others—tell your story clearly

Why Most Lenders Don’t Offer Manual Underwriting (And Why We Do)

Manual underwriting takes more time and skill. That’s why many lenders won’t touch it. At Gustan Cho Associates, we work hard because we believe in second chances.

We have no lender overlays on FHA, VA, and USDA loans. That means we follow the guidelines, not our own extra rules. We make it happen if the guidelines allow manual underwriting with extenuating circumstances.

Manual Underwriting Mortgage Lenders That Accept Tough Files

We’ve helped thousands of borrowers across the U.S. who were turned away by other lenders. Our team reviews every file manually before submitting it to underwriting. If we see a chance to get it approved, we’ll fight for it.

Can You Qualify With Recent Collections or Charge-Offs?

Medical collections? Small charge-offs? These don’t automatically disqualify you. You may still qualify if they were caused by extenuating circumstances, and your current finances are strong. We’ll guide you on how to write your LOX and gather documents.

Timeline: How Long Does Manual Underwriting Take?

Manual underwriting can take a few days longer than automated approvals, depending on how fast documents are submitted. At Gustan Cho Associates:

• Pre-approvals take 24–48 hours
• Manual underwrites typically close in 30 days or less
• We move faster than most lenders, even on complex files

Final Thoughts: You Can Still Qualify for a Mortgage

If you’ve been through tough times, you’re not alone. Many borrowers get denied for things that weren’t their fault. Don’t give up. With manual underwriting with extenuating circumstances, your story matters.

At Gustan Cho Associates, we see the full picture. We have helped thousands of clients who were told “no,” we can help you, too.

Start the Process Today

Even if you don’t qualify today, we’ll create a plan to help you get mortgage-ready. Borrowers who need a five-star national mortgage company licensed in 50 states with no overlays and who are experts on manual underwriting with extenuating circumstances, please contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com.
We’re available 7 days a week and ready to guide you every step of the way.

Visit https://www.gustancho.com to learn more about how we help people like you get approved for the home they deserve.

Frequently Asked Questions About Manual Underwriting with Extenuating Circumstances:

Q: What is Manual Underwriting with Extenuating Circumstances?

A: Manual underwriting with extenuating circumstances means a real person (underwriter) looks at your loan file and considers life events—like medical issues, job loss, or divorce—that hurt your credit but were out of your control.

Q: Can I Still Get a Loan with Bad Credit if I have a Good Reason?

A: Yes. If you have a low credit score due to an emergency or job loss, you may still qualify through manual underwriting with extenuating circumstances, especially with help from Gustan Cho Associates.

Q: What Counts as an Extenuating Circumstance for Mortgage Approval?

A: Things like medical bills, losing your job, a death in the family, divorce, or natural disasters are all examples of extenuating circumstances that may qualify you for manual underwriting.

Q: Do I Need to Explain What Happened to Get Approved?

A: Yes. You’ll need to write a short letter of explanation (LOX) and show documents (like hospital bills or layoff notices) to prove why your credit took a hit. This is key to getting approved through manual underwriting with extenuating circumstances.

Q: How Low Can My Credit Score be and Still Get Approved?

A: With FHA manual underwriting, you may qualify with a credit score as low as 500 if you have a strong explanation and the right documents. Gustan Cho Associates recently closed a loan with a score of 512 using manual underwriting with extenuating circumstances.

Q: What if I was Late on a Payment After Bankruptcy—Can I Still Get a Mortgage?

A: Maybe. One or two late payments after bankruptcy don’t always mean denial. If you have a valid reason and proof, you may still qualify with manual underwriting with extenuating circumstances.

Q: What Documents do I Need to Apply for Manual Underwriting?

A: You’ll need tax returns, bank statements, pay stubs, proof of savings, and documents explaining your extenuating circumstances, such as medical bills or unemployment records.

Q: How Long Does Manual Underwriting with Extenuating Circumstances Take?

A: It usually takes a few days longer than automated loans. At Gustan Cho Associates, most manual underwrites close in 30 days or less, depending on how quickly you provide your documents.

Q: Do Medical Collections Stop Me from Getting a Mortgage?

A: Not always. If the collections were caused by an extenuating circumstance like illness, and your finances are now stable, you may still get approved through manual underwriting with extenuating circumstances.

Q: Can Gustan Cho Associates Help Me if Other Lenders Said No?

A: Yes. We specialize in manual underwriting with extenuating circumstances and work with borrowers turned down elsewhere. If there’s a way to approve your file, we’ll find it.

This blog about “Manual Underwriting With Extenuating Circumstances” was updated on August 5th, 2025.