How Long Does Manual Underwriting for Home Loans Take?


If your loan application and qualifying factors don’t quite fit the mold of the standard loan applicant, you may find yourself dealing with manual underwriting. The good news is that you weren’t turned down for the loan. You were just told that the automated (computer) system can’t approve your loan. With manual underwriting, an actual human being will go over every detail of your loan to see if you qualify for it.

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So how long does this process take? As you probably guessed, it can vary by lender. Each underwriter works at a different pace and has a different size workload. It also depends on the complexity of your application. Do you have a lot of paperwork that needs sorting through? Or is your case pretty open and shut but the computer just couldn’t recognize the validity of it? These factors will determine exactly how long it takes to go through manual underwriting.

In order to give you an idea of what to expect, we walk you through the process below.

Completing the Loan Application

Anytime you apply for a mortgage, you must complete a Uniform Loan Application. On this application, you’ll complete your personal identifying information as well as your financial information. This includes your income, assets, and debts. You’ll also disclose your employment information. The lender then inputs this information into the computer program.

If you have a low credit score, high debt ratio, or unstable income, chances are the computer program will spit back a denial. Lenders often take the time to look at the issue at hand, though. They determine whether you would benefit from a manual underwrite or if you really aren’t eligible for a loan.

Providing Supporting Documentation

If the lender decides to go ahead with manual underwriting, prepare yourself for the load of paperwork ahead. Normally, you would have to provide your pay stubs and W-2s as well as your bank statements. With a manual underwrite, though, the underwriter digs deeper into your financial life. Expect them to ask a lot of questions and ask for a lot of paperwork.

Included in the paperwork is usually a Letter of Explanation. You’ll need one letter for each situation that may require a little explaining. For example, did your credit score fall tremendously because you fell ill and couldn’t pay your bills but now you are back on your feet? Your credit score may not reflect that you have bounced back yet, as that takes time. This is where the Letter of Explanation comes in handy. You can provide details of what caused the issue, how you overcame it, and where you stand today. Any paperwork you can provide alongside it can only help your situation.

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Proving Your Compensating Factors

If you do need manual underwriting, it’s best if you also have compensating factors. These factors make up for any risk factors you pose, such as a low credit score or high debt ratio. Compensating factors are anything that makes the lender see your application in a positive light. The most common compensating factors include:

  • Reserves – Any money you have in a liquid account can help you qualify for the loan. Reserves are money that sits in checking, savings, money market, stocks, bonds, or any other liquid asset. If you can access your money in a day or two, it’s a liquid asset.
  • Limited revolving debt – Revolving debt (credit cards) are risky in the eyes of the lender. If you have minimal or no credit card debt, this is a compensating factor that may make lenders consider your request for a loan.
  • Stable income – If you have stable income throughout the years and it doesn’t decrease year-to-year, lenders may see you as a reliable applicant. This is important because it makes them feel good that you’ll be able to afford the mortgage payment.
  • Other income – Sometimes just having the presence of ‘other’ income may help you get approved for a loan. Even if you can’t use the income to officially for qualify for the loan, it can be a compensating factor. If you have a side gig or you work part-time somewhere, that income could be the deciding factor that makes a lender give you a loan.

Manual underwriting usually takes longer than the standard underwriting process simply because a human has to go through every little detail of your application. In the end, they both work out the same; you just need to allow a little more time if your file falls under the manual underwriting process.

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