What is a 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

What is the Meaning of DU Findings?

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In mortgages, “DU findings” refer to the results generated by an automated underwriting system called Desktop Underwriter (DU), which Fannie Mae develops. The lender enters the borrower’s financial information into the DU system when the borrower applies for a mortgage loan. The DU system evaluates the borrower’s creditworthiness and decides whether they satisfy the lending requirements.

The DU findings provide a detailed analysis of the borrower’s credit profile, income, assets, and other relevant factors. Based on this analysis, the DU system generates recommendations for the lender, indicating whether the loan application is approved, denied, or eligible for further review. The findings also specify any conditions or requirements to be met for the loan to be approved.

Overall, DU findings are crucial in the mortgage underwriting process, helping lenders make informed decisions about loan approvals while ensuring compliance with lending guidelines and regulations.

What is a DU Loan Approval?

A DU loan approval refers to a mortgage loan approval decision made by Fannie Mae’s Desktop Underwriter (DU) system. DU system assesses mortgage applicants’ creditworthiness based on their financial information such as credit history, income, assets, and debt-to-income ratio.

An approval decision is reached once the DU system evaluates the borrower’s eligibility and lending criteria. Based on the information provided, this means that the loan application meets Fannie Mae’s underwriting standards and is approved for the specified loan amount.

A DU loan approval gives lenders confidence in the borrower’s creditworthiness and streamlines the mortgage approval process by reducing the need for manual underwriting. However, it’s important to note that a DU approval does not guarantee funding, as lenders may still need to verify information and satisfy other requirements before finalizing the loan. Click here for DU Loan approval

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.

What Does Automated Approval Assessment Mean?

Automated approval assessment uses computer systems to evaluate loan applications and determine approval without human intervention. It involves analyzing factors like credit history, income, and property value to generate a decision quickly and consistently. While it streamlines the process, not all applications can be approved automatically, especially those with complex situations.

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. Get approval for Non-Conforming loans, Click here

DU Automated Approval On FHA Loans

DU Automated Approval

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.

If you have any questions about what DU Automated Approval is or you need to qualify for FHA loans with a lender with no overlays on government or conforming loans, please contact us at Gustan Cho Associates at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com . The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

FAQ: What Is DU Automated Approval per AUS FINDINGS

1. What is DU Automated Approval? DU Automated Approval refers to a mortgage loan approval decision generated by Fannie Mae’s Desktop Underwriter (DU) system. It indicates that the borrower’s application meets Fannie Mae’s underwriting standards based on their financial information.

2. How does DU Automated Approval work? Lenders input the borrower’s financial data into the DU system. The system then analyzes credit history, income, assets, and debt-to-income ratio to determine eligibility and generate approval recommendations.

3. What are DU Findings? DU Findings are the results provided by the Desktop Underwriter system, detailing the borrower’s credit profile and whether the loan application is approved, denied, or requires further review.

4. What are the two types of automated underwriting systems? Fannie Mae’s Desktop Underwriter (DU) and Freddie Mac’s Loan Prospector (LP) are the two primary automated underwriting systems.

5. What are lender overlays? Lender overlays are additional lending requirements imposed by individual lenders above the standard guidelines set by Fannie Mae, Freddie Mac, FHA, VA, or USDA.

6. Can all loans be approved automatically? While automated approval assessment streamlines the process, not all applications can be approved automatically, especially those with complex financial situations.

7. How important is DU Automated Approval in mortgage lending? DU Automated Approval has become the industry standard for mortgage approvals, ensuring consistency and efficiency in the underwriting process.

8. What is the significance of DU approval for non-conforming loans? DU approval has been instrumental in qualifying non-conforming loans, giving lenders confidence in approving loans that don’t meet standard agency guidelines.

9. Can VA loans be approved with high debt-to-income ratios? VA loans can be approved with higher debt-to-income ratios, especially if the borrower has significant residual income and meets other criteria set by the automated underwriting system.

10. Is a DU Automated Approval a guarantee of funding? While a DU Automated Approval indicates eligibility based on Fannie Mae’s criteria, it doesn’t guarantee funding. Lenders may still need to verify information and fulfill other requirements before finalizing the loan.

Related> Automated Approval AUS

Related> Automated Underwriting System

This blog about What Is DU Automated Approval per AUS FINDINGS was updated on March 27th, 2024.

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