July 30, 2021

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Manual Underwriting: Could It Help You Buy a Home?

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Applying for a mortgage can be one of the most stressful steps involved in buying a home, especially if your financial situation doesn’t exactly follow your lender’s standard guidelines.

If your financial situation is more complicated than that of the average buyer, a manual risk assessment can improve your chances of getting approval. Unlike automated underwriting, which uses a computer program to review your application and assess your creditworthiness, manual underwriting employs a person to calculate the numbers.

Here’s what you need to know about manual underwriting:

What is manual underwriting?

Manual insurance is the process by which an underwriter carefully reviews your financial information to ensure you are qualified for a home loan. Some factors that they will look at are:

Something Mortgages Request manual underwriting if the automatic underwriting system (AUS) that is reviewing your application denies you permission. For example, FHA loans and VA loan that do not meet the lender’s minimum standards are automatically flagged for manual underwriting.

Learn: How to get a mortgage

Manual underwriting vs. automated underwriting

With automated underwriting, the lender uses an AUS – like Fannie Mae’s Desktop Underwriter – to take the data from your from Loan application. Lenders prefer automated underwriting because it streamlines the underwriting process and provides more consistent ratings.

Once your details have been entered into the system, AUS can either approve your application or refer it to manual underwriting.

The drawing process takes different lengths. It can take anywhere from a few days to a few weeks (or even longer in busier times). If your loan requires manual drawing, the process will take a little longer due to the additional work and documentation involved.

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Continue reading: How to Buy a Home: Step-by-Step Guide

Who could benefit from manual underwriting?

Lenders, as a first step, execute mortgage loan applications through their automated system and, if necessary, turn to manual underwriting or mixed underwriting to work towards approval. You can also ask your lender to manually sign your loan if you think your financial situation warrants it.

Here are a few situations where manual underwriting can work in your favor:

You have a non-traditional income

If you are Self-employed and want your self-employment income to be added to your income calculation – or you need to record your self-employment income as a source of your cash reserves – you can do so as long as you use a lender who is willing to manually subscribe your home loan.

Jumbo Loan

The 2021 compliant credit limit for most single family homes is $ 548,250. Mortgage loans for more than the conforming limit are called Jumbo Loans.

These loans are risky for lenders because of their size. So when you apply, you can assume that the lender will take over the loan manually as they want to dig deeper into your financial history.

You have a bad credit history

A previous one foreclosure, Deed instead of foreclosure or short sale can result in the AUS rejecting your application. Likewise a history of late debt payments or a low credit rating puts you in a difficult position to be admitted.

Manual underwriting can uncover positive factors like strong earnings or cash reserves and give you evidence that you can handle the monthly payments.

You have insufficient credit history

Lenders like to see lines of credit – also known in the industry as “tradelines” – because they show that you’ve managed your debt over the past year or two. If you do not have an established credit history, Manual underwriting can build one out of non-traditional tradelines such as rental and utility accounts.

What manual underwriters look for

Manual underwriters take into account many factors related to a borrower’s finances. Ultimately, they want to see that you have enough income and assets to pay back your mortgage loan. To do this, they take several factors into account.


The underwriter calculates your income from all sources, including non-traditional sources such as self-employment. Lenders want stable incomes and stable employment, such as long-term employment for the same company.

Credit history

The manual underwriter will look closely at the details of your credit history. You’re looking for an up-to-date history of on-time payments, as well as steps you’ve taken to boost your credit score.

They will also check that your creditworthiness passes the screening. Typically, you need a credit score of 620 for a conventional loan, 680 for a jumbo loan, and 500 for an FHA loan (580 if you are paying less than 10% less).

Although Veterans Affairs and the U.S. Department of Agriculture do not set a minimum score for VA and USDA loans, many lenders set their own minimum of 620 for VA and 680 for USDA-guaranteed mortgages.

Qualification rates

Qualification rates help a lender determine whether you will be able to repay the mortgage. The two types of skill relationships are front-end DTI and back-end DTI:

  • Frontend DTI: A measure of your home-related debt (such as what your expected new mortgage payment, taxes, and insurance would be) compared to your monthly income.
  • Back-end DTI: A measure of all of your debts compared to your monthly income. This ratio is most commonly used by lenders.


How much deposit What you need – and whether you need one at all – depends on the type of loan you are applying for. In general, however, the more you can accommodate, the more likely it is that you will be approved for the loan.

Loan-to-value ratio

The loan-to-value ratio indicates what percentage of the home value you have to finance. It is determined by subtracting your down payment amount from the value of the house.

So, for example, if you wanted to buy a $ 200,000 home at 10% ($ 20,000 less), your mortgage lending ratio would be 90%. Some programs accept LTV up to 97%.

Cash reserves

Your savings are known as cash reserves, and manual underwriters examine these funds in terms of how many months they would cover the expenses.

The underwriter also notes where the money came from – such as your regular salary or from gifts. If some came from gifts, they’d want to know what percentage.

Good to know: Not all loans allow you to use gift funds on a down payment. And even if you do, you will likely need to submit a “gift letter” from the contributor stating that you do not have to return the money.

How to prepare for manual underwriting

You need to submit a number of documents with your mortgage loan application, which is initially checked automatically. Some of these documents can be:

  • Pay slips for 30 days 30
  • Two current bank statements and broker statements
  • Forms W-2 and / or I9 for two years
  • Two years of income tax return
  • Documentation of balances and payments of loans

If AUS rejects your manual underwriting application, you may need to submit additional documentation. This could include:

  • Balance sheets, income statements, letters to customers, and other evidence of non-traditional income
  • Business license
  • Additional bank and broker statements
  • Documents for opening bankruptcy
  • Review rental payments, such as canceled checks, credit card statements, or statements from a rental inquiry service.