As the name implies, a manual underwriting mortgage is a type of home loan that is underwritten using a manual process, as opposed to an automated standard. Many people secure mortgages using automated review systems. A typical borrower with a high credit score and income can be processed quickly with an automated review. However, people may seek a mortgage that have unusual income documentation or credit scores. A bank may choose to process this person using a manual underwriting process, so that the computerized application does not reject their loan. At that point, you can provide additional documentation of your ability to repay debt that is not being detected through your credit score.
The Process of Manual Underwriting
Manual underwriting mortgages may be cumbersome to process. This is because the borrower may have complicated financials and documentation. However, it is a unique way for a lender to discover whether you can afford to repay a loan. You will have a mortgage person assigned to review the application. If you lack a solid credit history, because you have not borrowed much, then your application may be rejected from an automated process and referred to a manual underwriter.
Reasons People Use Manual Underwriting
There are many situations where someone would choose to go through manual underwriting. The process can help make home loans more accessible. Here are some of the common reasons:
- You have a foreclosure, bankruptcy, or recent financial problem that would cause an automated application to be rejected.
- You have a high debt-to-income ratio, so manual underwriting is needed to look into whether you can repay another debt.
- You have a lower credit score, scores below 640 may be rejected during an automated application process.
Seeking Approval for a Manual Underwriting Mortgage
If you seek to get a home loan approved through a manual underwriting mortgage, then you will need to prepare documentation of your ability to repay the loan. You can show your history of repaying debts, or paying insurance and utility bills. You can also offer a higher down payment amount to make the lender feel more comfortable with the risk.
Some report that underwriting with a government-backed mortgage may increase the likelihood of being approved. You may also possess a number of assets that you can use to demonstrate your ability to repay. Documentation that you hold a stable job or a successful business will also help greatly. You can expect to complete ample paperwork and to provide a lot of evidence during the process.
Nickel City Funding in Orchard Park, NY is here to help with any questions you have about manual underwriting mortgages. You can count on our professional staff for all the support you need!