Manual Underwriting Mortgage Loans
Get a Mortgage When You Don't Fit the Standard Credit Model
- ✔ No traditional credit score required
- ✔ Alternative credit history accepted
- ✔ FHA & VA loans available
- ✔ Ideal for thin credit files
Not everyone has a traditional credit score and that should not prevent homeownership. Manual underwriting provides a way to secure a mortgage for borrowers who cannot be evaluated by standard credit scoring models. At Alpine Mortgage we have experience helping borrowers with no credit score or thin credit files qualify for home financing.
What is Manual Underwriting?
In standard mortgage processing, automated underwriting systems evaluate applications using algorithms that rely heavily on credit scores. If you do not have a score or your score does not reflect your true financial responsibility, these systems may reject your application automatically.
Manual underwriting is al alternative to automated systems. Instead, a human underwriter reviews your complete financial picture including payment history for accounts not reported to credit bureaus. This hands-on review allows qualified borrowers who would otherwise be rejected to receive fair consideration.
Who Benefits from Manual Underwriting?
Manual underwriting is for borrowers whose credit files do not tell their full financial story:
No Credit Score
Some borrowers have insufficient credit history to generate a FICO score because they have not used traditional credit products.
Thin Credit Files
Borrowers with only one or two credit accounts may have scores that do not accurately reflect their financial responsibility. A single late payment on a thin file can cause disproportionate score damage.
Debt Free Borrowers
Borrowers who have chosen to live without credit cards, car loans, or other debt often have no credit score despite being financially stable. Manual underwriting recognizes that avoiding debt is not the same as being unable to manage it.
Bankruptcy
After bankruptcy, credit files can be thin as discharged accounts close and new credit is limited. Manual underwriting evaluates post bankruptcy financial behavior rather than relying solely on a recovering score.Manual underwtiting can also be used for borrowers that are currently in a Chapter 13 bankruptcy after they have been in the Chapter 13 repayment plan for at least 12 months.
Alternative Credit Documentation
For manual underwriting lenders accept payment history from sources that demonstrate financial responsibility but are not reported to credit bureaus:
Acceptable Alternative Credit Scores
Rent Payments. Twelve months of canceled checks, bank statements or a verification letter from a commercial landlord showing on time rent payments. This is the most important alternative credit reference.
Utility Bills. Twelve months of on time payments for electric, gas, water or trash service. Accounts must be in the borrower's name.
Insurance Premiums. Twelve months of on time payments for auto insurance, renters insurance or life insurance.
Cell Phone Bils. Twelve months of on time mobile phone payments. The account must be in the borrower's name and not part of a family plan in someone else's name.
Documentation Requirements
Borrower's usually need three to four alternative credit references with 12 months of payment history each. Documentation must show account holder's name, payment due dates and amount paid and no late payments in the last 12 months
At Alpine Mortgage, we help borrowers identify which accounts qualify and help gather the proper documentation.
Manual Underwriting Requirements
Because manual underwriting involves more hands on risk assessment requirements are often stricter in other areas to offset the lack of traditional credit data:
Debt to Income Ratio
Manual underwriting requires lower debt to income ratios than automated approval. FHA manual underwriting allows a maximum total debt ratio of 50% with compensating factors. VA manual underwriting must meet residual income requirements.
Cash Reserves
Reserves demonstrate financial stability and provide a cushion for unexpected expenses. Borrower's should be able to document 2 to 3 months of mortgage payments in reserve after closing.
Employment History
Two years of stable employment in the same field is typically required. Self employed borrowers need two years of tax returns showing consistent income.
Call us today at (800) 876-LOAN to speak with one of our manual underwriting mortgage specialists or click here to have one of our manual underwriting home loan specialists contact you.
Steven Parangi is a licensed attorney and licensed mortgage loan originator (NMLS #76024) with over 20 years of experience in residential home lending. As the founder of Alpine Mortgage, Steven works directly with borrowers to review their mortgage options and assist them throughout the home financing process. Content published on AlpineBanker.com is reviewed regularly by Steven to reflect current lending guidelines and market conditions.
View full author profile →Manual Underwriting FAQs
- Improve Your Credit. Ensure all bills are paid on time as late payments can affect your credit score. Also, lower your credit utilization ratio by paying down existing debt. Aim to keep your total outstanding at at 30% or less of your total credit limit.
- Save for Larger Down Payment. Saving for a larger down payment of over 10% qualifies you for more options.
- Work with a Credit Repair Specialist. A credit repair specialist can help with fixing errors on your credit report and improve your credit scores.
You'll need to provide various documents, including proof of income (such as pay stubs or tax returns) and recent bank statements. For a complete list of documents needed, see our document checklist.
Government backed loan programs, such as an FHA loan, VA loan and USDA loan, are usually the easiest type of loan to get approved for.
Good income will help lower your debt ratio and is a strong compensating factor that lenders take into consideration when evaluating an applicant with bad credit.
Most negative information will remain on your credit report for 7 years, including late payments, charge-offs, collections, and most public records.Bankruptcies can stay on your report for up to 10 years, depending on the type.
Manual Underwriting Resources
Get a Quick Quote
"*" indicates required fields