FHA Mortgage Loans Enable Compensating Factors to Overide Automated Underwriting
Filed under FHA news, Published Articles · Tagged: FHA loan, mortgage loan
During the mortgage refinance process, many borrowers fight to get beyond the application stage for several reasons. Especially during this credit crisis that we are experiencing, getting a mortgage approval can be quite tough to say the least. When an applicant gets rejected by the mortgage lender it may become personal. The common reaction would be to reaccess your mortgage loan application and simply ask “Why wasn’t I approved?”
Fortunately, one of the beauties of FHA mortgages is that the process of manual underwriting and compensating factors. For potential borrowers and those interested in FHA home loans, understanding how compensating factors work will give you the edge you need if your loan is on the borderline of an approval or denial.
Automated and Manual FHA Underwriting Explained
In the mortgage industry, lenders will typically advertise to originators that they use manual underwriting, use “common sense” underwriting, or accept files that “just make sense”. While a number of these are nothing more than just marketing gimmicks, potential borrowers need to understand the advantages of manual underwriting.
Because of technology, when a FHA home loan is submitted electronically, the approval/denial response can be instantaneous. This immediate automated underwriting saves time and reduces processing loads, but it can also be a disadvantage to applicants. With manual underwriting, people actually underwrite the loan rather than a computer program. As a result, if a loan isn’t approved under the DU or LP automated underwriting systems, a manual underwriter can make certain exceptions because of certain compensating factors.
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