What is manual subscription? | Mortgages and advice

When you apply for a mortgage or another type of loan, it may feel like your whole financial life is on the line. Through a process called underwriting, the lender looks at factors like your income and credit score to determine if you qualify for a loan.

If you have a steady income, a decent cash reserve, minimal debt, and a good credit rating, the underwriting process may not be more traumatic than your regular teeth cleaning. If, however, your finances aren’t as fair or simple – like if you recently had a black mark on your credit or your income isn’t as regular as bi-monthly paychecks – the underwriting process might reveal the need for some fillings.

When your financial situation raises red flags for lenders, it can be difficult to qualify for a loan, especially if the lender simply enters your information into an automated system. In such cases, it may be helpful to have a human eye review your application through a manual subscription.

What is manual subscription?

Manual underwriting occurs when an individual underwriter reviews your application information to determine if you qualify for a loan. This underwriter is a highly skilled and trained professional who uses their knowledge and instincts to determine if the loan can be approved, says Dan Holtz, founder and CEO of mortgage company Sovereign Lending Group.

“Manual underwriting can be helpful for people who are lacking in one area of ​​their financial history but meet or exceed all other qualifications,” says Vadim Verdyan, head of advice for personal finance app Albert.

For example, an automated underwriting process may reject you if you do not meet the minimum credit score requirement built into its formula. “With manual underwriting, you have the ability to explain yourself and highlight other financial areas that may show you qualify for the loan despite a lower score,” Verdyan says.

What is the difference between manual subscription and automated subscription?

When a lender uses manual underwriting for a loan application, a human underwriter reviews it instead of underwriting software. Manual and automated underwriting can each assess factors such as the borrower’s credit history and income.

But with manual underwriting, the human underwriter can ask additional questions about any issues raised in the analysis, Verdyan says. This can allow for a more holistic review of the application.

“That said, manual underwriting typically requires more time and documentation because a human reviews each line of the loan rather than a computer,” Verdyan says.

You may be able to switch to manual subscription if you are not eligible for automated subscription. “Depending on the guidelines of the type of loan you’re trying to acquire, an automated underwriting may be more black and white and will tell you if it’s eligible and if not, the reasons why it’s not,” says Holtz. “Then it would be determined to see if the loan can be replaced with a manual underwriting.”

When is manual subscription used?

Mortgage lenders can usually use manual underwriting or automatic underwriting, and they will usually submit applications to an automated system first. Fannie Mae offers an automated subscription system and a manual subscription option.

Automated underwriting can also be used for other loan products. “Automated underwriting is generally more common for things like credit cards as well as personal and auto loans,” says Verdyan.

Depending on your situation, a manual subscription may be necessary or useful. “Manual underwriting tends to be more common for larger loans like mortgages and commercial loans and in smaller financial institutions that don’t have the infrastructure in place to automate formula and algorithm-based underwriting. “, explains Verdyan.

Manual underwriting is also more commonly used for borrowers with complex tax returns or balance sheets, such as businesses, he says.

“Whenever the system is unable to define ‘income,’ a lender may default to manual underwriting,” says Holtz.

What do you need for manual subscription?

“Manual underwriting typically requires more documentation than automated underwriting,” says Verdyan. According to Verdyan, you can expect to be asked to show the following documents for manual subscription:

  • Your credit report.
  • Several years of tax returns showing your income.
  • Pay slips.
  • Your assets and liabilities, including bank and investment statements.
  • Commercial documents if you are self-employed.

“Basically, if there are any uncertainties in your financial documents, you need to be able to demonstrate that you can and will repay that loan without issue,” Verdyan says.
Every loan is different, however, your underwriting experience may vary depending on the type of loan you want and your lender.

“Do your research on mortgage companies and what they offer when it comes to underwriting,” says Holtz. “Also, work with your loan officer or processor to determine which documents will be most helpful in helping you secure a loan before underwriting to speed up the process.”

About Irene J. O'Donnell

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