What Is DU Automated Approval On Automated Underwriting System

This BLOG On What Is DU Automated Approval On Automated Underwriting System Was UPDATED On And PUBLISHED On June 4th, 2020

What Is DU Automated Approval On Automated Underwriting System

A sound mortgage loan approval?  My Loan Officer told me I had a DU Automated Approval, what is that? There are two types of automated underwriting system approvals.

  1. Fannie Mae Desktop Underwriter also referred to as DU
  2. Freddie Mac Loan Prospector also referred to as LP

In this article, we will discuss and cover What Is DU Automated Approval On Automated Underwriting System.

Fannie Mae Versus Freddie Mac AUS

Most lenders use Fannie Mae Desktop Underwriter versus Freddie Mac’s Loan Prospector.

  • DU is simply an acronym for Fannie Mae’s Automated Desk Top Underwriting System
  • It stands for Desktop Underwriter
  • DU looks at mortgage loan application and credit report
  • The findings point out if the loan is salable to Fannie Mae or not
  • This would be also be a good indicator that borrower meets all of Fannie Mae Mortgage Guidelines

How Mortgages Get Approved And Closed

Not all lenders have the same mortgage guidelines on government and conventional loans.

  • Just because a borrower does not qualify with Mortgage Company A does not mean they cannot qualify with Mortgage Company B
  • All borrowers need to meet agency mortgage guidelines by either FHA, VA, USDA, Fannie Mae, Freddie Mac
  • This is done by getting an approve/eligible per DU Findings and/or LP Findings
  • However, lenders can have additional lending requirements called lender overlays
  • Overlays are lending requirements above and beyond those of FHA, VA, USDA, Fannie Mae, Freddie Mac.
  • Lenders with no agency overlays such as Gustan Cho Associates will only go off Automated Underwriting System Findings.

Gustan Cho Associates Mortgage Group ONLY cares about Automated Underwriting System Approval and has ZERO OVERLAYS on FHA, VA, USDA, and Conventional Loans.

DU Automated Approval Is The Industry Standard

Why DU Automated Approval Is The Industry Standard

DU has become the industry standard not only for Fannie Mae mortgages but all loan programs.

  • Fannie Mae and Freddie Mac are referred to “Conforming Loans.” 
  • It has become the standard barometer for government insured mortgages, and other types of loans as well
  • All government and conventional loans needs to either go through DU and/or LP Automated Underwriting System
  • The Automated Underwriting System is also referred to as AUS
  • Automated Underwriting System is a very sophisticated automated system that analyzes a borrowers credit and income profile within seconds and renders an automated decision


The readings from AUS is the following:

  • Approve/Eligible Per AUS
    • This means that the borrower has an automated approval
  • Refer/Eligible Per AUS
    • This means that borrower is eligible for mortgage but the automated system cannot render a decision and needs to be manually underwritten by a human mortgage underwriter
  • Refer/Caution
    • Refer/Caution means that borrower does not qualify for mortgage 
    • It may be because they do not meet the mandatory waiting period after housing event and/or foreclosure

DU Automated Approval For Non-Conforming Loans

DU was also instrumental in the qualifying of nonconforming, and sometimes referred to subprime, no doc, stated income, and liar loans.

  • There was even an Alt A category, and AE or Approved Eligible 1, 2, and 3 categories at one time
  • It’s actually an artificially intelligent algorithm that interprets loan purchaser guidelines as provided to DU
  • A loan officer, processor, and an underwriter still verify the information a borrower provides to check it against the DU findings
  • But for the most part, if the information required by DU can be verified, the loan will be approved.

DU Automated Approval On FHA Loans

What is this DU Automated Approval On FHA Loans

Most FHA loans are approved with DU and much more liberal than an actual underwriter would approve an FHA loan manually.

  • If an FHA loan were to be manually underwritten, most underwriters and/or lenders would require the total back end debt ratio to be under 43%
  • DU can approve and FHA borrower with debt ratios as high as 56%
  • I just had a borrower approved by DU with a debt ratio of 53%, a 580 credit score, a $5,000 seller credit, and 100% of the down payment was a gift
  • The client only had $84 in their checking account
  • This sounds like a loan that may not be possible
  • However, I had a DU approval and I could verify the information
  • I now have a good FHA borrower who is able to close on their home loan

Debt To Income Ratios And DU Automated Approval

We just got a VA loan approval with a 65% DTI. I couldn’t believe it, but DU approved it. The Department of Veterans Affairs (VA) has no minimum credit score requirements and no cap on debt to income ratios.

  • The VA takes residual income when AUS triggers it decision
  • Some other factors into their approval calculations includes reserves, down payment, overall payment history
  • This client had some assets in the bank , older outstanding collections/charged off accounts, timely payments in past 12 months, and a good credit score
  • But 65% of total income was the client’s total debt to income ratio after adding the proposed mortgage
  • This approval really shocked me but we got an approve/eligible per DU FINDINGS

Just to reinforce my previous comment, borrowers have to still verify the information entered into DU. Just a DU approval on its own is just a piece of paper. The moral of the story, if borrowers have a DU automated approval, and can meet conditions stated on AUS, they can close their home loan with a lender with no overlays.

Related> Automated Approval AUS

Related> Automated Underwriting System

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