Dear Friends – ever really wonder what basis lenders use in determining the approval of a mortgage loan? The obvious things that come to mind would be credit history (and credit score), debt-to-income ratio, funds available for down payment, etc. But what are the dividing lines? Why does it appear that some borrowers may get approved over others, even if it may appear to some that they may have the same (or stronger) credentials that a Lender would look for? The answer to this paradox may be with the response a borrower may receive with the lender’s “Automated Underwriting Findings” or “AUS.”
Automated Underwriting: Is using a completed loan application to derive a computer-generated loan underwriting decision. An “Automated Underwriting System” (AUS) retrieves relevant data, such as a borrower’s income, assets, and credit history, to arrive at this logic-based loan decision. Many of the inputs used to reach this logic-based loan decision, such as income, assets, etc., must be verified at a later date. ~ Source Investopedia. The advantage to Automated underwriting approvals are that generally: (1) there is less documentation required from the borrower, (2) the borrower may be approved for a higher than standardized debt-to-income ratio for the program they seek, and (3) the borrower may usually obtain better rate offers then manually approved borrowers.
Manual Underwriting: Is often used successfully to approve some borrowers that cannot receive approval through the Automated Underwriting System. This is commonly referred to in lending as the lender’s AUS: “Refer/Eligible” findings. The “Manual underwriting” of a loan application is the process of assessing the financial risk of granting a mortgage approval upon an unfavorable decision from an Automated Underwriting System (AUS). ~ Source: Quroa. The advantage of Manual underwriting is that borrowers who would not normally get approved with automated underwriting, can do so with a manual loan approval. These examples may be where the borrower has thin credit combined with a lack of savings history, or simply lower credit scores then are required for AUS approval (620 in many cases).
At Priority Mortgage / Polaris Home Funding, we are well versed and experienced in being able to do both Automated loan approvals, and Manual loan approvals in a very fast, efficient, and low cost manner for the borrower. For an idea of your qualifications for a home loan, we are available by referral Monday’s – Saturday’s 9:00am to 8:00pm, and Sunday’s 1:00pm to 8:00pm.