What Is Manual Underwriting And Can It Help You Get A Mortgage Approval?

7 Min Read
Updated March 7, 2024
Houses on a lake in autumn.
Written By Victoria Araj

The process of obtaining a mortgage can seem simple on the surface, but behind the scenes, there can be many moving parts. One of the biggest of those is underwriting. While underwriting is largely automated now, manual underwriting does still happen and can be helpful to you in certain circumstances.

What Is Manual Underwriting?

When you’re applying for a mortgage loan, underwriting is the process that verifies and analyzes your finances, determining if you can afford the mortgage. Manual underwriting is the underwriting process done by a human who’s checking the paperwork for the mortgage. Most lenders these days use algorithms to determine approval. In some cases, if the algorithm rejects the application, manual underwriting might be the next option.

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How Does Underwriting Work?

Underwriting is when the lender looks at your debt, assets, income and the details of the property you’re buying to determine whether they can put a stamp of approval on the mortgage. There are two ways underwriting is done: automatically and manually.

Automated Underwriting

Automated underwriting uses technology to analyze your financials and decide on final loan approval. One of the big benefits of automated underwriting is its speed. An algorithm can reach a decision on a loan at a much faster rate than a human. However, this doesn’t work for everyone. Algorithms are made for standard applicants. If you’re self-employed or have had past financial problems, automated underwriting may not cut it for you.

A Human Eye

Manual underwriting takes a lot of skill. A human has to go through your finances line-by-line to make sure everything is in order. This takes longer than automated underwriting but can be beneficial to some applicants. For instance, if you work seasonally or are self-employed, you may have a harder time getting a mortgage with automated underwriting. Also, some loans, like jumbo loans, are routinely reviewed by an underwriter.

What Types Of Mortgages Offer Manual Underwriting?

Depending on what mortgage you apply for, you have different options when it comes to manual underwriting.

Conventional Loans

A conventional loan is any loan a private lender makes without government insurance. These fall into one of two categories: conforming and nonconforming.

Conforming Loans

Conforming loans are mortgages that fit Fannie Mae and Freddie Mac’s requirements. Namely, they must fall within the loan limits they set. Typically, these loans are done with automated underwriting, though applicants may request manual underwriting. However, lenders aren’t required to fulfill this request.

Nonconforming Loans

Nonconforming loans don’t fit Fannie Mae’s or Freddie Mac’s requirements. That doesn’t mean there’s anything wrong with them. They just aren’t bought back after origination. These loans include jumbo loans, which may put a greater emphasis on manual underwriting, especially with loans that exceed $3 million.

Government-Insured Mortgages

Government-insured mortgages are nonconforming loans that are backed by the government. While these loans don’t involve directly borrowing from the government, the government backing encourages lenders to make loans they wouldn’t otherwise make. Here’s how these various loans work with manual underwriting.


The FHA loan program requires lenders to seek manual underwriting review when an applicant has a credit score lower than 620 and a debt-to-income ratio (DTI) greater than 43%. According to the U.S. Department of Housing and Urban Development (HUD), you may qualify with a 580 credit score and a DTI of 50%.

Depending on your financial situation, you’ll also need to make a down payment of at least 3.5% and may need to demonstrate that you have the FHA compensating factors to make the mortgage work. These include having extra cash reserves for three or more monthly mortgage payments or having extra residual income.


VA home loans are a huge benefit of military service. One of the great things about VA home loans is that requirements are often more flexible. Still, there are times when manual underwriting might be necessary. These include if there’s been a major recent financial event, like a foreclosure, bankruptcy or delinquency on federal debt. Even recent late payments or a lack of credit history may require the human touch of manual underwriting.


USDA loans can be a great option for those moving to a rural area. In general, they have more flexible credit and down payment requirements than conventional loans. In terms of manual underwriting, applications who don’t pass automated underwriting are often referred to manual underwriting. However, like with FHA loans, lenders do not have to offer manual underwriting.

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What Factors Do Underwriters Look For During Manual Underwriting?

During manual underwriting, underwriters will look at income, assets, debt and the property you’re applying for. To do this, they’ll need documentation. This includes:

  • A year of bank statements
  • Multiple years of tax documents
  • Account information for your retirement and/or brokerage accounts
  • Pay stubs or proof of income if you’re self-employed
  • Proof of ownership of other assets, such as vehicles

Why Do I Need Manual Underwriting?

You may need to request manual underwriting if you have any of these issues:

  • No credit history or debt: Even if you’re committed to living debt-free, it’s important to have a credit history. A history of debt shows lenders that you can handle debt and are able to pay back the loan.
  • Past financial problems: A low credit score or negative financial event, like a bankruptcy or previous foreclosure, will raise a red flag. A human underwriter may be able to see these as isolated incidences if there are signs of recent progress.
  • High DTI: The DTI ceiling for conforming loans is 43%. With FHA loans, you may be able to qualify for a higher DTI – up to 50% – with the manual underwriting process.
  • Self-employed or seasonal wage earners: Algorithms prefer stability and predictability. This can make it difficult for seasonally employed or self-employed borrowers to be approved with automated underwriting.

How Often Do Underwriters Deny Applications?

According to research by the Consumer Finance Protection Bureau (CFPB), the overall denial of mortgage applications in 2021 was 8.3%. That’s down from 2020, which had a denial rate of 9.3%, and 2019, where the denial rate was 8.9%.

What Can I Do To Improve My Chances Of Approval?

  • Increase your down payment: A large down payment means you have more skin in the game This can allay lender concerns because it shows you have the capacity to responsibly save the large down payment.
  • Reduce your debt: Reducing your debt lowers your DTI. Since DTI is one of the main factors in mortgage approval, having a lower percentage will help you get approved.
  • Improve your credit score: A higher credit score shows lenders you can handle debt and make on-time payments. A higher credit score can increase your chances of approval, and it could land you a better interest rate.
  • Build up your cash reserves: Having cash reserves makes you less of a risk. It shows your lender that you’re prepared for an emergency. If a major financial setback happens, you’ll still have money in the bank to pay your mortgage.

The Bottom Line: Manual Underwriting Brings A Human Touch

If your loan application has been denied, request manual underwriting and work with your lender to see if there’s a better option for you. Manual underwriting can give home buyers one last overview by someone who may be able to dig deeper and discern more of a person’s history or income type.

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