An automated underwriting system (AUS) is a computer program that analyzes your loan application — rather than a human reviewer — and decides within minutes whether or not you should get approved for a mortgage. Thanks to their efficiency, completely and partially automated underwriting systems are becoming more and more common.
How does an automated underwriting system work?
When you apply for a basic mortgage, lenders will often use an AUS to analyze your application. Some lenders use automated underwriting systems to guide their human underwriters, while others leave things completely up to the algorithm. Most conventional mortgage lenders use Fannie Mae algorithms.
The AUS will review the information you provided (name, current address, income, Social Security number, etc.) and probably pull additional details, such as your credit report. Based on its calculations, it takes the AUS only a minute or two to make a decision about your application.
Depending on your lender, one of a few things can happen after an AUS review:
- A manual (human) underwriter will review your application, using the AUS analysis to guide their decision-making.
- A manual underwriter will check your loan application for accuracy before rubber stamping the AUS’s decision.
- The automated system's decision is final, no human will look at your application, and you’ll get a near-instant answer.
☝️ Don’t count on an instant decision
While an automated underwriting system does speed things up compared with manual underwriting, and AUS can still flag applications for human review — for instance, if it can’t find your credit report.
Is automated underwriting better than manual?
An AUS offers speed, less bias, and high accuracy. Manual underwriting, on the other hand, recognizes nuance and can spot instances of human error. No human or system is perfect, though, so always double-check your application for accuracy, and take the time to check your credit score and report.
⏲ Automated underwriting can offer almost-instant decisions on loans, whereas manual underwriting can take days, weeks, or even months. So if you’re in a hurry to get a loan, applying with a lender that uses an AUS can speed things up for both of you.
⚖️ Some people argue that automation takes bias out of the underwriting process — but since algorithms are manually designed, they may have built-in biases.
In addition, manual underwriting can see, for instance, that you have a good reason for the gap in your employment history (especially if you include a letter of explanation). An AUS, though, will judge your application without considering extenuating circumstances.
🎯 Automated underwriting is over 95% accurate, whereas manual underwriting tends to be up 90% accurate. However, computers won’t notice lots of errors and typos that a human underwriter might ― like a missing zero in your income or a fraudulent entry on your credit report.
☝️ You can request manual underwriting from your lender if your financial profile is on the more complex side — for example, if you're:
- Applying for a nontraditional loan (e.g., jumbo or interest-only)
- Applying with bad credit or a short credit history
FAQs about automated underwriting
Roots Automation. "Can you rely on automated underwriting systems to approve loans?."