Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I will be applying for a mortgage in a couple months and I'm curious what will determines whether a loan goes through and automatic underwrite or a manual review?
I've been told that higher debt to income ratios are allowed via automated underwriting vs. manual...is this true?
There is some myth, that I beleive was created by some nut job TV personality with friends in a dying mortgage business, that somehow one could get an advantage by ending up in manual underwriting or automated. Not true. Lenders have to have some manual underwritting guidelines that allow for the possibility that some one has such mismatched income / debt / credit / employment that they might trigger a "fair housing discrimination" review but in reality something greater than 90% of all loans go perfectly smoothly through automated underwriting...
Fannie, Freddie and FHA all have stated ratios for manual underwriting. All three state you can exceed the manual underwriting criteria, provided you can get a DU (Desktop Underwriter) or LP (Loan Prospector). Fannie has come out and said they will not tolerate a DTI over 45%. Our investors have told us they will not cross a 50% DTI on FHA. And if we submit and FHA over 47%, we better have our ducks lined up w/ some real sweet compensating factors. I can't help you with Freddie, but it's my understanding they are slightly more tolerant than Fannie. Almost all loans must be able to pass automated underwriting. If not, that underwriter better have a killer memo why this one file does not conform to the rest.
The mortgage industry is still undergoing a crack-down. It will probably continue. What you are told today, may not even apply come January 1. Manual underwriting serves as a check and balance, to make sure the automated system doesn't decline someone that should be approved. The only reasons to allow for manual underwriting are credit report related: No social security number or no credit scores. I am only aware of portfolio lending allowing for manual underwriting. The exceptions (the manual underwritten files) also carry a price tag, if you can find someone to do it. Everyone else requires use of the Automated Underwriting System.
Freddie has been running 55%, but it looks like that has been pared back to 50% per my most recent few deals approaching these limits.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.