Manual Underwriting: When the Computer Says No

Saxton Mortgage will. At least one FHA program we offer manually underwrites loans that receive a Refer from TOTAL Scorecard, loans with non-traditional tradelines or borrowers without a credit score, and Accept files that the underwriter downgrades to a Refer. On a manual file, credit is acceptable when all housing and installment payments, including rent and utilities, were made on time for the past 12 months, with no more than two 30-day late mortgage or installment payments in the past 24 months.

Not necessarily. On government programs a refer routes the file to manual underwriting rather than ending it. Many non-agency programs never run an automated system at all. What is true is that conventional conforming loans largely cannot be manually underwritten.

Named triggers include recent mortgage lates, fewer than three consecutive payments since a forbearance ended, undisclosed mortgage debt the automated system never saw, disputed accounts, and any information in the file that the scorecard cannot evaluate.

Yes, at the base tier. A manually underwritten government file starts at tighter ratios than an automated approval and works upward from there as you document compensating factors. On at least one government program the ladder is 31/43 at the base, 37/47 with one documented factor, and 40/50 with two. On the rural housing program the purchase base is 29/41, moving to 32/44 with a credit score of 680 or above plus one documented factor.

Guidelines name them: reserves, residual income above the regional requirement, a minimal increase in housing payment with clean history, no discretionary debt, long employment, significant additional income not counted as effective income, conservative use of credit, and substantial liquid assets among others.

Generally yes. A person is reading the whole file rather than a system returning a decision, and conditions tend to be more specific. Well-organized documentation shortens it considerably.

It can be. On at least one government program the manual underwrite path carries a lower credit score floor than the automated path at the same loan amount, paired with a tighter maximum ratio.

Usually. Guidelines state that a borrower without a credit score is reviewed with nontraditional credit and the loan is manually downgraded, with its own ratio cap. On at least one government program that cap is 31/43, and only the income of borrowers who will live in the home and are obligated on the mortgage counts toward it.

Manual underwriting is when a human underwriter reads and approves your file instead of an automated system doing it. The automated system compares your file to a set of rules and returns an approval or a refer. A refer is not a denial, it just means the software will not make the call. On government and non-agency programs a manual underwrite is a documented, published path to approval with its own ratio caps and its own list of compensating factors.

AUS stands for automated underwriting system, the software that reads a loan file first. It returns either an approval or a refer. A refer means the system is declining to decide, not that the lender has declined you. A file can also be downgraded to a manual underwrite by the lender even after an approval, usually because something in the file needs a person to weigh it.

Thin credit, meaning few accounts or a short history, is one of the situations manual underwriting exists for. An underwriter can look at rent, utilities and other non-traditional payment history, at your reserves and at your residual income, none of which an automated system weighs the same way. Every borrower still needs at least the minimum the program requires.