Importance Of DU Automated Approval
A sound mortgage loan approval? My Loan Officer told me I had a DU Automated Approval, what is that?
DU is simply an acronym for Fannie Mae’s Automated Desk Top Underwriting System and it stands for Desktop Underwriter. DU looks at your loan and the findings point out if the loan is salable to Fannie Mea or not. This would be also be a good indicator that another mortgage purchaser such as Chase Bank, Wells Fargo, or Stearns might purchase a mortgage.
DU Automated Approval Is The Industry Standard
DU has become the industry standard not only for Fannie Mae mortgages, or as they are referred to “Conforming Loans,” but has become the standard barometer for government insured mortgages, and other types of loans as well.
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
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.
Debt To Income Ratios And DU Automated Approval
We just got a VA loan approval with a 60% DTI. I couldn’t believe it, but DU approved it. The VA takes residual income and some other factors into their approval calculations, and this client had some assets in the bank and a good credit score; but 60% of your total income was the client’s total debt to income ratio after adding the proposed mortgage. This approval really shocked me.
Just to reinforce my previous comment, you 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 you have a DU automated approval, and you can verify the information provided to obtain the DU automated approval, you have.