How Long Does It Take To Qualify For A Mortgage With Bad Credit

Understanding The Automated Underwriting System Approval

ByGustan Cho

This article covers Understanding The Automated Underwriting System Approval

Understanding The Automated Underwriting System Approval is key for borrowers with less than perfect credit. There are certain ways of manipulating the automated underwriting system towards your favor to get automated approval. The automated underwriting system is commonly referred to as AUS. AUS is an intricate sophisticated computer system that will analyze the borrower’s credit report, scores, income, debt, assets, and financial profile within a matter of seconds and render automated findings. The automated underwriting systems have the specific algorithms of each government agency mortgage guidelines as well as Fannie Mae and Freddie Mac agency guidelines.

There are cases where borrowers will not get an AUS approval on Fannie Mae but will get an AUS approval with Freddie Mac. Therefore, if you get denied with Fannie Mae, try it with Freddie Mac and see if you can get an AUS Approval and vice versa. If you get denied with Freddie Mac LP, try Fannie Mae DU. There are ways of manipulating the AUS system to get an approve/eligible if the AUS is not rendering an automated approval. Fannie Mae and Freddie Mac have different AUS systems. Fannie Mae’s AUS is called DU or Desktop Underwriter. Freddie Mac’s AUS is called LP or Loan Prospector.

We will further discuss tricks and tips on how to get an approve/eligible per AUS if you get a refer/eligible per AUS.

Understanding The Automated Underwriting System And The Three Different Types Of Findings

There are three findings the AUS will render:

  • Approve/eligible which is an automated underwriting system approval
  • Refer/eligible which means the AUS cannot render a decision and needs to be downgraded to a manual underwrite which means a human mortgage underwriter needs to underwrite the file
  • Refer with caution means a loan denial by AUS
  • There are instances where a lender may downgrade an approve/eligible per automated underwriting system approval file to a manual underwrite

The Mortgage And Home Buying Process

The first step of the home buying process is for the homebuyer to qualify and get pre-approved by a loan officer. The loan officer’s job is to qualify the borrower prior to issuing the pre-approval letter. A mortgage loan application will be taken. A tri-merger credit report will be pulled. The loan officer will request the borrower’s past two years’ income tax returns. 30 days of bank statements will be reviewed. The loan officer will require paycheck stubs for the past 30 days.

The loan officer will then enter the file into the automated underwriting system. The findings of approve/eligible are what everyone is hoping for. However, there are instances where the AUS will render a refer/eligible and/or refer with caution. A refer with caution findings is an automatic denial. However, with a refer/eligible per AUS, the file can be downgraded to a manual underwrite. However, there are instances where an experienced loan officer can convert a refer/eligible per AUS to an approve/eligible. We will cover some tricks of the trade where we can convert a refer/eligible per AUS to an approve/eligible in the following paragraphs.

Key In Getting An Approve/Eligible Per AUS From Refer/Eligible Findings

There are ways in getting a refer/eligible per automated underwriting system to an approve/eligible per AUS. Here are some ways of getting an approve/eligible if you get a refer eligible by the following:

  • If you get a refer eligible per AUS with Fannie Mae DU AUS, try to submit it to Freddie Mac LP AUS
  • Freddie Mac is normally more lenient when it comes to credit standards versus Fannie Mae
  • Try removing gift funds if you have gift funds for cash to close for the down payment
  • Gift funds are not viewed favorably by the automated underwriting system
  • Try adding more down payment versus the minimum down payment required
  • Try adding three to six months of reserves
  • The automated underwriting system algorithms favor reserves and strong compensating factors

Many of our loan officers at Gustan Cho Associates are experts in manipulating the automated underwriting system to render an automated approval. If you have less than perfect credit and need a national mortgage company with no lender overlays licensed in multiple states, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, evenings, and holidays.

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