When seeking a mortgage loan to buy a home, applicants hope to receive a favorable approval. However, a negative lending decision can derail the opportunity to borrow enough money to complete the purchase. Perennial Funding has assisted many borrowers who were previously denied for a home mortgage loan.
Mortgage lenders use an automated underwriting system to determine whether an applicant qualifies for funding. The decision-based model saves mortgage lenders a lot of time and resources. Initially, a licensed mortgage specialist will enter your information into a loan origination system. Thereafter, your information gets submitted into the AUS for a computer-based lending decision.
The software within the AUS is largely comparing your information against qualifying criteria that is underwritten in accordance to guidelines from Fannie Mae and other investors.
If the automated underwriting system generates an approval for your loan request, a loan officer will be able to make recommendations for a variety of mortgage products. However, if a denial is issued via the AUS, a letter will be sent to you that explains the reason for the unfavorable decision.
Automated underwriting systems are checking your qualifications to see if you meet certain approval conditions for a home mortgage loan. Generally, the AUS is measuring the strength of your “ICE.” See a breakdown of the acronym below.
Income – Compares the income that you provided on the Residential Mortgage Loan Application against the requested loan amount to determine if you can afford to make regular monthly payments.
Credit – Reviews open and closed tradelines that appear on your credit report, your recent payment experiences with creditors and your credit score.
Equity – Refers to your down payment when you are buying a home or the equity that you currently have when you’re refinancing your home. This component shows a lender that you too have some skin in the game. For example, if you are approved for financing that provides funding for 95 percent of the purchase price, the investor wants you to contribute 5 percent of your own money or home equity toward the transaction.
While risk-based software is used to determine a borrower’s credit worthiness and financial capacity, there are some instances that may be outside of the mold. For an AUS submission that gets denied, one of our loan officers can share the information with a mortgage underwriter for a manual review.
Some consumers obtain in-house financing from local auto dealers, jewelry stores and other merchants that may not report to the major credit bureaus.
If your credit report reflects a limited history of timely payments to your creditors, you might be able to supply alternative forms of credit to strengthen your credit profile. For instance, you may be able to provide proof of timely payments to your landlord, insurance company, furniture stores or other creditors.
An underwriter can manually review your loan application for a variety of scenarios, such as recent changes to your income, medical debts and other errors that may be impacting your approval via the automated underwriting system.
Contact Perennial Funding at (888) 826-4856 if you were denied for a home loan or if you would like to apply for a mortgage loan.