What are possible conditions

[Shann0n_marie]

The Automated Underwriting System is a sophisticated computer system that will render a decision on whether a mortgage applicant is approved for a mortgage loan based on the information from the 1003 and credit reports.  The Automated Underwriting System will take into account the mortgage applicant;s income, debt, liabilities, assets, credit scores, and credit history.  Based on the information, the Automated Underwriting System will report its findings and can require conditions like rental verification, reserves, assets, and other mortgage conditions... regardless of this, the underwriter still has to validate all of the documentation and data input for integrity.

Approve/Eligible files get an automated approval.   Refer/Eligible files are mortgage applications that is eligible for mortgage approval but is not approved due to certain factors such as not enough assets, high debt to income ratios, or other factors that can be corrected for an automated approval.  Refer with caution pretty much means a denial due to certain factors that do not meet Fannie Mae, Freddie Mac, or FHA mortgage lending guidelines such as the borrower not having met the mandatory waiting period after a foreclosure, deed in lieu of foreclosure, short sale, or bankruptcy.  For files that do not meet automated underwriting system guidelines, the files can be manually underwritten.

Not all mortgage lenders can do manual underwriting mortgage applications.  For those that do, there are more restrictions that apply than automated approved mortgage files.  Manual underwriting is done for files that cannot get AUS automated approvals.  Manual underwriters look for strong compensating factors such as rental verification and lower debt to income ratios.  Manual underwriting maximum debt to income caps are set at 31 front end debt to income ratios and 43% back end debt to income ratios.  For mortgage loan borrowers with no credit scores, a manual underwriting mortgage approval process can get them a mortgage approval by using non traditional credit such as rental verification,  electric bills, water bills, cable bills, internet bills, cellular bills, insurance bills, tuition, and other alternative sources.  The way to prove that is by providing the mortgage underwriter 12 months worth of cancelled checks.

[Anonymous]

Very informative! Thank you.

[QueenBeeOC]

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@Shann0n_marie wrote:

Ok, so usually a manulal downgrade occurs when the AUS (automated underwriting service) app does not recognize certain items within your credit report and take them into accounnt.  An example would be if you had a BK and a Foreclosure, or tons of lates but they were included in your BK, etc.  It is not necessarily a bad thing to have it downgraded... it often gives the underwriter more flexibility than when underwritten through the AUS. The only bad thing is that the DTI (debt to income ratio) is constricted to a certain % - usually 45%, whereas a loan that is underwritten through the AUS has more flexibility, as long the decision is returned as Approve/Eligible.

What does your credit profile look like?

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Shannon - My credit has no deroggatories, my husbands has lates on an auto loan all prior to January 2012. So I dont think those count.

My Utilization is a little higher than I like but our scores are OK. 

We got on a payment plan for the IRS (no leins or levys or on our reports) just 2013 taxes that need to be paid. 

we're waiting on our appraisal and going back to UW. Longest 22 days of my life.

[wendlan]

I did get a preapproval letter first and that included taxes for two years, w2s,rent verification,alternative tradeline verification ect...I am doing an FHA loan and have a chapter 13 bankruptcy and past forclosure due to a divorce. That is why we are a manual underwrite,without it we wouldn't be getting a loan at all so I am grateful.