DU Automated Approval

What Is DU Automated Approval per AUS FINDINGS

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will cover and discuss what is DU automated approval on the 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

Fannie Mae Versus Freddie Mac AUS

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 applications and credit reports. The findings point out if the loan is salable to Fannie Mae or not. This would also be a good indicator that the borrower meets all of the 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, or 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.

What Are Lender Overlays

Overlays are lending requirements above and beyond those of FHA, VA, USDA, Fannie Mae, and Freddie Mac. Lenders with no agency overlays such as Gustan Cho Associates will only go off Automated Underwriting System Findings. Gustan Cho Associates 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

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 as “Conforming Loans.” It has become the standard barometer for government-insured mortgages, and other types of loans as well. All government and conventional loans need 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 borrower’s credit and income profile within seconds and renders an automated decision.


The readings from AUS are 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 a mortgage but the automated system cannot render a decision and needs to be manually underwritten by a human mortgage underwriter


  • Refer/Caution means that borrower does not qualify for a 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 as 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 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

DU Automated Approval On FHA Loans

Most FHA loans are approved with DU and are 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 FHA borrowers 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 its decision. Some other factors in their approval calculations include reserves, down payment, and overall payment history. This client had some assets in the bank, older outstanding collections/charged-off accounts, timely payments in the past 12 months, and a good credit score.

VA Loan With High Debt-To-Income Ratio

Borrowers can easily get approve/eligible per the automated underwriting system on VA loans if they have a lot of residual income. 65% of the total income was the client’s total debt to income ratio after adding the proposed mortgage in the above case scenario, which surprised the whole team at Gustan Cho Associates 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