How Long Does Manual Underwriting Take?

Manual underwriting involves a human underwriter reviewing a loan application, rather than relying on automated systems. This process is often necessary for applications that do not fit standard criteria. The duration of manual underwriting can significantly impact financial planning for individuals seeking loans.

Understanding Manual Underwriting

Manual underwriting involves an underwriter’s personal assessment of a loan applicant’s financial situation. This human evaluation contrasts with automated underwriting, which uses computer algorithms to quickly assess quantifiable data. Automated systems often provide conditional approvals within minutes by comparing credit scores, debt, and income against predetermined guidelines.

Applications typically undergo manual underwriting when they present complexities automated systems cannot handle. Common scenarios include a thin credit file, limited borrowing history, no credit score, or a high debt-to-income ratio exceeding automated thresholds. Other reasons involve recent bankruptcy or foreclosure, self-employment with fluctuating income, or non-traditional income structures like commissions. Certain loan programs, such as FHA or VA loans, may also require manual review, especially if applicants have credit scores below 620 or debt-to-income ratios exceeding 43%.

Key Factors Determining the Timeline

The timeline for manual underwriting can range from a few days to several weeks, or longer, depending on various factors. While automated systems offer quick conditional approvals, manual processes are slower due to detailed human review. For instance, a file approved by an automated system might close in 30 days, but a manual underwrite could add 10 days to that timeline.

Application complexity significantly influences the duration. Borrowers with complex income structures, like self-employment requiring two years of tax returns or multiple jobs, need extensive documentation and review. Missing or unclear documents, such as incomplete pay stubs or bank statements, prolong the process as underwriters request additional information. Lender workload and staffing levels also play a role; a high volume of applications or limited staff can cause delays.

The type of loan also impacts the timeline, as different products have varying manual underwriting requirements. Government-backed loans like FHA, VA, and USDA loans, especially with unique circumstances, often require manual review and specific guidelines. Responsiveness of third parties, such as appraisers, employers verifying employment, or previous lenders providing payoff statements, can introduce delays. Efficient communication between the applicant, loan officer, and underwriter can either streamline or hinder the process.

Applicant Actions to Optimize the Process

Applicants can take proactive steps to streamline the manual underwriting process. Providing all requested documents promptly and thoroughly is important. This includes submitting clear, legible copies of pay stubs, W-2s, tax returns, and bank statements, and responding to requests for additional information without delay. Organized financial records can significantly reduce back-and-forth communication, which often slows the review.

Maintaining open and proactive communication with the loan officer is beneficial. Applicants should ask questions to understand what information is needed and why, preventing pitfalls that lead to delays. If unique financial circumstances exist, such as a recent job change or a large deposit, discussing these early can prepare the underwriter.

Applicants should avoid making significant financial changes during the underwriting period. This includes refraining from changing jobs, opening new credit lines, making large purchases, or moving funds between accounts without consulting the loan officer. Such actions can alter the financial profile under review, potentially triggering additional scrutiny and prolonging approval. Stability in finances helps ensure a smoother, more predictable underwriting experience.