Refer Eligible Versus Approve Eligible In AUS Findings

What happens if you get a refer eligible versus approve eligible in the automated underwriting system? A refer eligible versus approve eligible means the automated underwriting system (AUS) cannot the eligibility of the borrowers.  Refer eligible versus approve eligible means the file can be approved but needs to be manually underwritten.

The AUS is signaling a human mortgage underwriter needs to be assigned to the file in order to determine the eligibility of the borrower. Refer eligible versus approve eligible means the borrower is eligible but a human underwriter needs to manually underwrite the borrower.

What Is The Automated Underwriting System (AUS)

The automated underwriting system (AUS) is where all mortgage loan applications need to get through after the borrower has completed the mortgage application and the loan officer has pulled a tri-merger credit report. Once all the data of the borrower has been gathered and completed, the loan officer will submit the mortgage loan application along with the tri-merger credit report to the automated underwriting system.

What Are The Findings of The AUS?

There are three types of findings from the automated underwriting system:

1. Approve eligible per AUS
2. Refer eligible per AUS
3. Refer with caution

The automated underwriting system will normally render an approve/eligible per findings. However, there are times when the AUS findings will render a refer eligible versus approve eligible. Again, a refer eligible means the file needs to be manually underwritten. The Automated Underwriting System is a sophisticated underwriting system that analyzes a mortgage loan application of a borrower within seconds and renders its automated findings. In the following paragraphs, we will discuss and cover what refer eligible per automated findings are and how it works.

The Automated Underwriting Systems Lenders Use

The Automated Underwriting System, also known as AUS renders an automated decision after analyzing the following:

• borrower’s credit scores
• credit payment history
• credit tradelines
• borrower’s delinquent accounts
• borrower’s public records
• judgments
• bankruptcies
• foreclosures
• short sales
• deed in lieu of foreclosure
• tax liens
• credit disputes on charge-off accounts and non-medical collections
• outstanding collection accounts
• borrower’s charge off accounts
• income
• assets

Every single line item of borrower stated on the 1003 mortgage loan application.

What Is The 1003 Mortgage Loan Application?

All mortgage lenders will require the 1003 mortgage loan application to be completed. On the last page of the 1003, the mortgage loan applicant needs to disclose information pertaining to the findings of the automated underwriting system. Some of the questions include the following:

• where it asks whether the borrower has owned a home before
• had a prior bankruptcy or foreclosure
• civil judgments against them
• any pending lawsuits
• Within minutes or seconds of entering the financial and credit profile into the Automated Underwriting System, the AUS will render a decision

It will come out as Approve/Eligible, Refer/Eligible, or Refer/Caution.

Approve Eligible Per Automated Findings

Approve Eligible Per Automated Underwriting System means the borrower meets all of the mortgage lending guidelines for the loan program, whether it is an FHA Loan, Conventional Loan, VA Loan, or USDA Loan. An approved eligible per automated findings means that the Automated Underwriting System has reviewed all of the borrowers’ credit and financial profiles.

It means the AUS finds the borrower is approved via the automated underwriting system on the loan program. The approve eligible per automated findings will come back with a list of items that for the automated approval to be valid that the mortgage loan borrower needs to provide.

Conditions Required By The Automated Underwriting System

Examples of conditions requested by the Automated Underwriting System may be the following

• verification of rent
• reserves
• leases on departing properties
• certain paperwork and documents
• written payment agreements
• or collection accounts or judgments to be satisfied

Mortgage lenders with no overlays will just go off the approve eligible automated findings.

Lender Overlays

Lenders with no overlays will not have additional lending requirements besides the conditions from the Automated Underwriting System. Homebuyers who need a direct lender who specializes in mortgage loan programs with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. Our national team of licensed and support personnel are available 7 days a week, on evenings, weekends, and holidays to take your calls and answer all of your questions.

Refer Ineligible Per Automated Findings

Refer/Caution Per Automated Underwriting System means that the borrower does not qualify for the particular loan program. Ineligible means the borrower does not meet the criteria of the mortgage loan program. For example, a refer/caution per automated findings will occur if a borrower has not met the mandatory waiting period after bankruptcy and/or foreclosure.

FHA Loans After Bankruptcy

FHA lending guidelines state that a borrower cannot qualify for an FHA Loan after a Chapter 7 Bankruptcy unless they had passed a two-year waiting period after a Chapter 7 Bankruptcy discharged date. There is a three-year waiting period to qualify for an FHA Loan after a foreclosure, deed in lieu of foreclosure, and short sale. There is no waiting period after a Chapter 13 Bankruptcy discharge date to qualify for FHA and VA Loans.

Mortgage Waiting Period After Bankruptcy

There is a four-year waiting period to qualify for a conventional loan after a Chapter 7 Bankruptcy, deed in lieu of foreclosure, or short sale There is a two-year waiting period to qualify for a conventional loan after a Chapter 13 Bankruptcy discharge date. There is a four-year waiting period to qualify for conforming loans after the Chapter 13 Bankruptcy dismissal date per Fannie Mae and Freddie Mac Guidelines. Those who have recently filed for a Chapter 13 Bankruptcy can qualify for an FHA Loan one year into their Chapter 13 Bankruptcy with the Chapter 13 Bankruptcy Trustee’s approval. Borrowers need to show they have made timely payments to their creditors for at least 12 months

What Does Refer Eligible Versus Approve Eligible Per AUS Mean

Refer Eligible Per Automated Findings means that the borrower does qualify for a mortgage loan. However, the automated underwriting system cannot render a decision. The mortgage loan application may need to be downgraded to manual underwriting; Manual underwrites on FHA and VA Loans are very common. All FHA and VA manual underwriting files require verification of rent.

What Is Verification Of Rent?

Verification of Rent is only good and valid if and only if the renter can provide 12 months of canceled checks. Renters need to be timely on all rental payments for the past 12 months. Renters can also provide 12 months’ bank statements if they have been paying their monthly rental payments online via bank transfer from their account to their landlord’s bank account. Cash payment for rent is not valid. Rental payments that have been paid with cash cannot be counted as verification of rent.

Cash Rental Payment To Property Management Company

If the renter has been renting their home or apartment from a registered property management company, then canceled checks are not required. Verification of rent form completed and signed by the property manager of the property management company can be used in lieu of 12 months of canceled checks or 12 months of bank statements. I have not heard of any lenders that do a manual underwrite on conventional loans. All manual underwriting requires timely payments for the past 12 months.

Refer Eligible Per Approve Eligible on Conventional Loans

Manual underwriting is mainly for FHA and VA loans. For borrowers who get a refer eligible per versus approve eligible per automated findings on conventional mortgage loan applications, downgrading it to a manual underwrite is not an option. However, the mortgage loan originator can play around with the Automated Underwriting System where they can get the refer eligible per automated findings to an approve eligible.

Increasing Credit Scores on Conventional Loans To Get a Refer Eligible To Approve Eligible

Loan officers at Gustan Cho Associates are experts in boosting borrowers’ credit scores to get refer eligible findings to approve eligible. There are many possible solutions to get a refer eligible to approve eligible. The mortgage loan officer can see if they add more reserves, or put down a higher down payment. The loan officer can see if the borrower can add tradelines by adding the borrower to another credit card user as an authorized user.

How To Get Refer To Approve Eligible

There are many possibilities the loan officer can try to see if the automated underwriting system will render an approve eligible per automated findings. If all else fails, maybe the borrower’s credit scores may need to get increased. After credit scores improve, the loan may try running it through the automated underwriting system again.

Qualifying For A Mortgage With A Direct Lender With No Overlays

Borrowers who need to qualify for a mortgage with a mortgage broker licensed in 48 states with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates A large percentage of our loans are manual underwrites. Over 75% of our borrowers are folks who could not qualify at other lenders due to their overlays or because the lender did not offer the mortgage loan option the borrower needed.

Frequently Asked Questions (FAQs)

1. Q: What is the difference between “Refer Eligible” and “Approve Eligible” in Automated Underwriting System (AUS) findings?
   A: “Refer Eligible” indicates that the automated underwriting system requires further review by a human underwriter to determine loan eligibility. “Approve Eligible” means that the AUS has approved the loan application based on the information provided without needing additional review.
2. Q: Why did my loan application receive a “Refer Eligible” finding?
   A: A “Refer Eligible” finding may occur if the automated underwriting system identifies certain risk factors or discrepancies in the loan application that require manual underwriter review for clarification or additional documentation.
3. Q: What does it mean if my loan application is “Approve Eligible”?
   A: An “Approve Eligible” finding indicates that the automated underwriting system has determined the loan application meets all eligibility criteria and is approved for the requested loan amount without further review.
4. Q: Can a “Refer Eligible” finding result in a loan denial?
   A: Not necessarily. While a “Refer Eligible” finding may require additional documentation or clarification, it does not automatically result in a loan denial. The final decision depends on the underwriter’s assessment of the borrower’s qualifications and adherence to lending guidelines.
5. Q: How long does it take to receive a decision after a “Refer Eligible” finding?
   A: The time frame for receiving a decision after a “Refer Eligible” finding varies depending on the lender’s processing timeline, the loan application’s complexity, and the required documentation availability. Borrowers should work closely with their loan officer to expedite the review process.
6. Q: What factors determine whether a loan application receives a “Refer Eligible” or “Approve Eligible” finding?
   A: Automated underwriting systems evaluate various factors, including credit scores, income, debt-to-income ratio, employment history, assets, and property information, to generate findings. Borrowers with strong credit profiles and stable financial backgrounds are more likely to receive an “Approve Eligible” finding.
7. Q: Can I appeal a “Refer Eligible” finding?
   A: While borrowers cannot appeal the automated underwriting system’s decision directly, they can work with their loan officer to address any issues identified in the “Refer Eligible” finding and provide additional documentation or explanations to support their loan application.

Gustan Cho Associates has hundreds of non-QM mortgage loan programs for primary homes, second homes, and investment properties. To start your pre-qualification process or need more information, please contact us at 262-716-8151 or text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and on holidays.

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