The full explanation
For FHA loans, HUD requires manual underwriting when the automated system returns a “Refer” or the file must be downgraded to a manual review, and also for borrowers with no credit score who use nontraditional credit. The rules can be stricter: at Fannie Mae, the maximum debt-to-income ratio is lower.
An example
Teresa has no credit score and applies for an FHA loan using her rent and utility history. Her lender explains that her loan will be manually underwritten and that it will ask for more documents.
You will see it in…
- What the lender tells you when the automated system returns a “Refer”
- FHA's rules (HUD Handbook 4000.1) for borrowers with no credit score
- Fannie Mae's Selling Guide, in the rules for manually underwritten loans
