Automated Underwriting    

In the last five years the mortgage industry has changed dramatically.   One of the driving forces behind this change has been the advent of automated underwriting systems.  In an automated underwriting system a computer performs the initial review of a loan, and makes notes of what the person performing the final review should focus on.  This speeds up the process considerably since the underwriter can concentrate on specific things in the loan file rather than spend time performing a full review of the complete file. 

One of the primary indicators the computer will look for is your credit score.  It will then take into consideration how much you are putting down, and your debt to income ratios to develop a profile of your current financial status.  These (and other) factors are plugged into a mathematical equation to determine the likelihood that you will be an acceptable credit risk. 

None of this really sounds all that different until you realize the the first step performed by the automated underwriting system takes place in about 45 seconds.  That is a huge improvement over the 20 to 30 days you previously had to wait.  

Before credit scoring was put to use in the mortgage market place it was tested extensively by Fannie Mae and Freddie Mac.  They tested the scoring mechanism on over 1 million loans that were already on the books.  The predictions of the automated systems were compared with what actually happened.  The systems were found to be a very accurate tool for forecasting loan performance.

This system is not perfect, and this was recognized early in the process.  As a result it is not possible for the automated underwriting system to decline your loan, it can only refer your loan to a full underwriting by an approved underwriter.  However it is possible for the computer to approve your loan.  A borrower who has a high credit score and a low risk profile will have to provide less documentation, and the lender will require less verification due to the reduced risk of default as predicted by the automated underwriting system.

Other Books In the Library

Main Library Page <> Down Payment Stratagies <> Chart of Interest Rates <> Questions To Ask A Lender <> What Are Lenders Looking For? <> Why Buy A Home <> VA Loans <> FHA Loans <> Settlement Cost Handbook <> 3 Things To Avoid <> How To Get Out Of Debt <> Understanding How To Use Credit <> Credit Repair <> Appraisals <> Title Insurance <> Credit Scores <> Automated Underwriting <>