Yesterday, we mentioned a borrower who could not qualify for mortgage financing because he had no credit. There is an exception, however, that we did not mention for brevity’s sake.
The borrower will likely qualify for FHA financing with a “Manual Underwrite” and “Alternative Credit.”
What Are DU, AUS, and LP in Mortgage Lending?
99% of lenders will NOT approve a loan unless it is eligible for an “Automated Approval” known as either “DU,” “AUS” or “LP.”
Some qualified borrowers, however, simply cannot get an “automated approval” because of a lack of credit, an error on a credit report, or low credit scores.
How Manual Underwriting and Alternative Credit Work
If such borrowers have low debt ratios and no recent late payments, they can qualify for a “Manual Underwrite.” This is an old-fashioned style of very conservative underwriting that involves an underwriter evaluating every aspect of a credit file.
Our borrower above would also have to provide “alternative credit;” he would have to show strong payment histories for utility bills, phone bills, insurance bills, etc.
