What is Manual Underwriting for a Mortgage and When is it Required?
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What is Manual Underwriting for a Mortgage and When is it Required?

Michael Jensen, Mortgage and Finance Guru
By , Mortgage and Finance Guru
Edited by Harry Jensen

For the vast majority of mortgages, your loan application actually goes through two underwriting review processes to make sure that you meet qualification guidelines for your down payment, credit score, debt-to-income ratio, employment history and other factors. The first underwriting process is performed by the lender to ensure that you satisfy their internal requirements. The second underwriting process is performed by the company or organization that is going to buy or insure the mortgage that is approved by the lender.

Although you apply for a mortgage with a traditional lender such as bank, mortgage bank, mortgage broker or credit union, most loans are purchased, guaranteed or insured by a third party. For example, conventional mortgages are purchased by Fannie Mae or Freddie Mac, FHA loans are insured by the Federal Housing Administration (FHA), VA loans are insured by the Department of Veterans Affairs (VA) and USDA home loans are insured or guaranteed by the U.S. Department of Agriculture (USDA).

Even though you do not interact directly with these third party organizations that purchase, guarantee or insure your mortgage, you are required to meet their qualification guidelines, in addition to your lender’s, for your loan to be approved. Because these organizations collectively underwrite millions of mortgages a year, they use an automated process to evaluate your loan application based on their specific qualification criteria.

For example, Fannie Mae, Freddie Mac, the FHA, VA and USDA all apply minimum credit score and down payment requirements as well as a maximum debt-to-income ratio limit. The automated underwriting process uses software and technology to evaluate your mortgage application to make sure you meet the qualification requirements, with minimal human involvement or intervention.

As long as your loan application is relatively straightforward and you meet standard qualification guidelines, then your lender can use these organizations’ automated underwriting systems to get your application approved. Automated underwriting is fast and cost-effective so lenders prefer this method to have your application reviewed.

When is Manual Underwriting Required?

While automated underwriting applies to the majority of mortgages, what happens if your application is not perfect? What happens if you do not meet a qualification requirement or you want to request an exception to an organization’s underwriting policies? This is where manual underwriting is required.

If your application will not be approved using automated underwriting, your lender can submit your application for a manual underwriting review. As the name suggests, the manual underwriting process involves an underwriter at the organization reviewing your application including any unique issues or exceptions to standard underwriting guidelines. Issues that trigger manual underwriting vary by mortgage program and may include the following:

It is important to highlight that manual underwriting applies to all applications that are not eligible for automated underwriting. So if Fannie Mae, Freddie Mac, the FHA, VA or USDA change their guidelines for automated underwriting, this impacts manual underwriting as well. If these organizations make their standard underwriting policies more stringent, then more applications are subject to manual underwriting, and vice versa.

How is Manual Underwriting Different Than Automated Underwriting?

Whereas automated underwriting is primarily a technology and rules-driven process, manual underwriting is a people-driven process that involves exceptions. The manual review process usually requires the borrower and lender to submit additional documentation such as a letter of explanation or other supporting documents, to address the issue with your application. The underwriter reviews your complete application, including any extra documentation, and determines if you qualify for the mortgage.

For example, if you have a recent charge-off on your credit report you may be required to provide a letter of explanation that addresses why the charge-off occurred and the steps you took to resolve the issue.

In other cases, the issue that triggered the manual underwriting review may be offset if other aspects of your loan application are strong. For example, the underwriter may be willing to make an exception and approve an applicant with a low credit score if your debt-to-income ratio is low, you make a high down payment, you have significant financial reserves or if you have income sources that are not reflected on your loan application.

Manual underwriting is performed on a case-by-case, applicant-by-applicant basis and there is no guarantee that your loan application will be approved. In general, the approval rate for manually underwritten applications is significantly lower than the rate for applications that are reviewed through automated underwriting.

What Does Manual Underwriting Mean for Borrowers?

Applications that are manually underwritten take longer to review and their outcome is less certain. These applications also typically involve more work from both the borrower and the lender. Additionally, borrowers that are approved through manual underwriting may not be eligible for the full range of benefits offered by certain mortgage programs.

For example, a loan program that only requires a 3% down payment with automated underwriting may require a 5% down payment if an application is manually underwritten. Or a program that usually does not require borrowers to hold financial reserves at closing may require you to hold several months of reserves if your application is manually underwritten.

Borrowers should check with their lender and loan program to understand if manual underwriting requires them to meet unique or different qualification guidelines.

Do All Mortgage Lenders Do Manual Underwriting?

Manual underwriting is also more time-consuming and expensive for lenders so not all lenders are willing to do it. For example, some lenders only work with applicants that are eligible for automated underwriting.

If you have an issue with your loan application or are requesting an exception to a qualification requirement, check with your lender before you apply for your mortgage to confirm that the lender is willing to do manual underwriting.


In closing, it is important to understand if your loan application is subject to manual or automated underwriting. Manual underwriting can be very useful for borrowers with imperfect applications but requires extra time and effort. If you and your lender are willing to put in the work, manual underwriting may enable you to get approved for a mortgage.

Contact lenders listed in the table below to learn more about their underwriting process and to understand if you are eligible for automated or manual underwriting.  We recommend that you contact multiple lenders as qualification requirements vary by lender and mortgage program.  Comparing multiple lenders also enables you to find the best mortgage terms.

Current Mortgage Rates in Ashburn, Virginia as of June 19, 2024
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Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes, insurance premiums or private mortgage insurance if applicable. Actual payments will be greater with taxes and insurance included. Read through our lender table disclaimer for more information on rates and product details.

Related FREEandCLEAR Resources


"Selling Guide."  Fannie Mae Single Family.  Fannie Mae, July 2018.  Web.

"The Single-Family Seller/Servicer Guide."  Single-Family Business.  Freddie Mac, January 2020.  Web.

"FHA Single Family Housing Policy Handbook 4000.1."  Federal Housing Administration.  U.S. Department of Housing and Urban Development, January 2 2020.  Web.

"Single Family Housing Guaranteed Loan Program Technical Handbook." USDA.  U.S. Department of Agriculture, 2020.  Web.

"Lenders Handbook - VA Pamphlet 26-7."  VA.  U.S. Department of Veterans Affairs, 2020.  Web.

About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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