An automated underwrite occurs when a mortgage planner enters your application info into their loan origination system, pulls credit, etc. and then runs your particular lending scenario including pricing, loan size, closing costs, etc. thru a Fannie Mae underwriting engine. Results will come back with varying levels of approval and sometime a denial. Provided the info used to run the approval is accurate these results give the client a good idea on how to proceed with the loan structure they are seeking. These loans still have to be reviewed by an underwriter who will validate the info entered into the system and also clear other loan conditions-appraisal, title, etc.
A manual underwrite occurs when either the findings above or the particular loan program guidelines state the loan must be manually underwritten and approved by an physical underwriter. The underwriter will ensure your loan to value, debt to income, etc. meet the intended guidelines of the program.
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"Automated Underwrite" means the use of a software platform to determine eligibility of an application for delivery by the lender to Fannie Mae, Freddie Mac, or to be insured by FHA.
FannieMae's software is known as Desktop Underwriter.
FreddieMac's software is known as Loan Prospector
FHA's software is known as FHA Total Scorecard.
An approval by the automated underwriting software simplifies the underwriting by the lender and eseentially guarantees eligibility (if the software's attached conditions are met) for delivery by the lender to FannieMae or FreddieMac.
Manual underwriting means the traditional analytical method of underwriting used before the advent of AUS systems. There is no prior-issue gurarantee of delivery, so lenders typically take longer to approve and impose tighter guidelines on manual underwriting.
However, the availability of manual underwriting is one of the benefits of FHA insured transactions. Manual underwriting for FHA is most often used when the borrower(s) have little or no established credit or special circumstances that require review and approval by a delegated FHA underwriter.