Mortgage and Portfolio Loan Guide

What is Manual Underwriting?

If you have been told you do not qualify for an FHA or VA loan, but were not given a reason, a manual underwrite may be your ticket to getting approved.

What is a manual underwriting mortgage?

Traditional mortgage loans have two ways of getting approved: automated underwriting and manual underwriting. When the loan is manually underwritten, the scenario is evaluated with a more fine tooth comb than automated underwrite to ensure the borrower meets required guidelines. A manual underwritten mortgage is often a deal saver if the loan doesn’t receive an automated approval.

Automated approval vs. Manual Approval

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Mortgage lenders use a “desktop underwriting” system where the mortgage application is imported and then sent to get “automated findings”. Based on the application data (income, credit, assets, property) the desktop underwriter (automated approval) with give:

  • Approve/Eligible
  • Approve/Ineligible
  • Refer/Eligible
  • Refer with caution

Approve/Eligible means based on the application submitted, the borrower appears to meet minimum guidelines for the mortgage they are applying for. If approve/eligible findings are received there is high confidence the loan will be approved assuming the application is correct and all income/credit/asset/property can be verified per requirements on the automated findings. Lenders are not required to share the findings.

Approve/Ineligible findings in my opinion are most commonly found when there are not enough assets for funds to close (down payment, costs, escrows, and reserves) or the length of time employed or housing history is incomplete.

Refer/Eligible means the borrower appears to meet minimum guidelines, but the loan needs to be manually underwritten in order to confirm that is the case.

Refer with caution means there appears to be significant risks with the loan, and the applicant most likely does not meet minimum underwriting standards for the loan they are applying for.

When referring to a “manually underwriting mortgage” the findings with the automated underwrite would be Refer/Eligible.

The problem with manual underwriting mortgage:

Many lenders do not do manual underwriting.


Because like I mentioned above, with a manual underwrite the loan needs to be underwritten with more of a fine tooth comb which means it slows underwriters down. The guidelines on manually underwritten mortgages are more strict than automated underwritten loans as well.

Many lenders tend to chose a path of least resistance, and only allow automated underwriting to be done. This leaves many borrowers left with a denial letter and no direction as to what to do.

The good news is that there are plenty of lenders who do offer manually underwritten mortgages.

If you have been told that you do not qualify for a mortgage, ask specifically: “What is causing me to not be approved?”

If you can clearly understand the reason for denial, you know what questions to ask if you end up pursuing approval with a different lender.

Perhaps the reason for denial is that your application received Refer/Eligible findings, and the lender you’re working with just doesn’t allow a manual underwrite to be completed.

Manual Downgrade

In some cases, even if the loan received Approve/Eligible findings, the loan has to be “downgraded” and be manually underwritten.

Here is the most comprehensive available list for manual downgrade scenarios:

The Mortgagee (Lender)  must downgrade and manually underwrite any Mortgage that received an Accept recommendation if: 

  • the mortgage file contains information or documentation that cannot be entered into or evaluated by TOTAL Mortgage Scorecard;
  • additional information, not considered in the Automated Underwriting System (AUS) recommendation affects the overall insurability of the Mortgage;
  • the Borrower has $1,000 or more collectively in Disputed Derogatory Credit Accounts;
  • the date of the Borrower’s bankruptcy discharge as reflected on bankruptcy documents is within two years from the date of case number assignment;
  • the case number assignment date is within three years of the date of the transfer of title through a Pre-Foreclosure Sale (Short Sale);
  • the case number assignment date is within three years of the date of the transfer of title through a foreclosure sale;
  • the case number assignment date is within three years of the date of the transfer of title through a Deed-in-Lieu (DIL) of foreclosure;
  • the Mortgage Payment history, for any Mortgage trade line reported on the credit report used to score the application, requires a downgrade as defined in Handbook 4000.1 II.A.4.b.iii (K) – Housing Obligations/Mortgage Payment History;
  • the Borrower has undisclosed mortgage debt that requires a downgrade; or
  • business income shows a greater than 20 percent decline over the analysis period.

If a determination is made that the Mortgage must be downgraded to manual underwriting, the Mortgagee must cease its use of the AUS and comply with all requirements for manual underwriting when underwriting a downgraded Mortgage.
For additional information see Handbook 4000.1 II.A.4.a.v.–vi. available here

What to expect if your loan is being manually underwritten?

Take a breath and prepare yourself. You’re going to need to be patient because your loan process is going to be slightly more complicated than an automated underwrite.

You’ll need to provide more documentation, and you’ll likely need to provide a few more letters of explanation to your lender.

The bit of extra work that it takes to get a loan approved with a manual underwrite is worth it. The approval is worth the work. The alternative is not doing the work, no approval, and no loan.

What if you’ve tried getting manually underwritten, and were still denied?

A portfolio loan may be your solution.

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Portfolio loans are mortgage options that work outside the “normal” lending guidelines. These loans are perfect for borrowers who don’t quite fit within the traditional mortgage requirements.

Examples of when portfolio loans are done:

Ending thoughts…

Just because one lender tells you that you do not qualify for a mortgage, that does not necessarily mean there aren’t any options for you.

Whether you get a manually underwritten mortgage or a portfolio loan, the extra effort is probably worth it. At the very least, you’ll have a 2nd opinion, and have clear understanding of what you do need to accomplish in order to qualify in the future.



Invite you to reach out to me.

Get your questions answered.



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Your Guide to Getting a First Time Home Buyer Loan

Cheers to adulting. When searching for the right first time home buyer loan it can be daunting and confusing to the point of saying “forget it, I’ll just live with Mom and Dad forever!”

The good news for you is that I have put together a full guide below on how to select the perfect first time home buyer loan. A comprehensive list of loan options that will leave you feeling like “okay world, I got this.”

What is a first time home buyer loan?

Basically, a first time home buyer loan is any mortgage option designed to cater to the needs of borrowers who have not bought a home in the past (recent 3 years) and have little-to-no funds available for down payment.

Typically, you need to have income and credit established, but there are options available even if you do not have traditional credit established.low down payment mortgage

Some options below do NOT require you to be a first time home buyer, but they have been listed because they are super popular for first time home buyers to take advantage of regardless.

Low Down Payment Mortgage | 1% Down

If you have a 700 credit score or above, this first time home buyer loan might be for you.

This is a conventional option, with typical mortgage guidelines. Except for one thing: you only have to put 1% down!

The way it is set up is on a 97% loan to value conventional loan, and you are actually gifted 2% from the lender. So it is a true 1% down loan.

In some areas of the US, there income limitations on this product. You can check your area for income limitations here.

This is pretty much a no brainer if you have good credit and stable income. Contact me to learn more on this option.

Main things to keep in mind with this 1% down mortgage

  • Down payment is 1%
  • Income limitations in some areas
  • Cannot have any ownership interest in any other residential dwellings at the time of closing
  • You do NOT have to be a first time home buyer to be eligible for this option

USDA Rural Development Loan | 0% Down

Getting a USDA Rural Development Loan is a great option for low-to-moderate income families who are looking to buy a house with zero down payment.

This is a very popular product for first time home buyers. Every area in the US is different in terms of income restrictions and whether or not the area you’re looking to buy in is eligible for a “rural development” loan.USDA rural development loan

Oddly enough, there are MANY areas in the country that are eligible for USDA rural development loans that I personally wouldn’t necessarily consider to be rural areas.

Some very well established suburban areas are eligible for USDA loans. Take a look for yourself here. Once you click “accept”, you’re able to plug in any address, and it will let you know if that address is eligible for a USDA rural development loan. Very easy to use.

The big thing to keep in mind with USDA loans (besides geographic location) is the income restriction on these types of loan.

All household income is taken into consideration (even if the spouse who will live in the home is not on the mortgage). Check out this useful tool to see if you fit within income eligibility restrictions.

Even some condominiums are eligible for a USDA Rural Development Loan. Unlike FHA loans, where the condo needs to be on the approved FHA condo list, USDA loans simply require a standard conventional condo review to be done (which is nice because it it much more simple than FHA in this case).

Main things to keep in mind with USDA Rural Development Loan

  • 0% down payment
  • Low credit okay (580 FICO minimum)
  • Income restrictions
  • Geographic restrictions

FHA Loan | 3.5% Down

In my humble opinion, FHA loans are probably the most commonly used loan product when it comes to first time home buyer loan options. This is because of low credit requirements and fairly low down payment.

Although you do not have to be a first time home buyer to be eligible for this type of loan, it is an attractive route to go due to the fairly flexible underwriting guidelines.

The nice thing about FHA loans is that they are available in every state and city. There are no geographic restrictions. But do be mindful of the FHA county loan limits. Check out the FHA county loan limits in your state here.

With an FHA loan there is NOT a maximum household income restriction, which is what makes it a nice alternative to USDA loans.

Even though you don’t have to be a first time home buyer to be eligible for an FHA loan, it is extremely rare to be able to have more than one FHA loan at one time. There are very few scenarios where it is allowed. So rare that those scenarios aren’t listed here due to guidelines changing frequently. Contact me for questions on that.

Main things to keep in mind with getting an FHA Loan

  • 3.5% down payment (if 580 or above credit)
  • No maximum income restrictions
  • Low credit standards (as low as 530 FICO – if below 580 higher down payment may be required)
  • Available in all cities in all states
  • Each county has set maximum loan amounts.

FHA Construction Loan | 3.5% Down

When you’re dealing with a market where inventory is low, a construction loan might be the perfect fit. You get to select the lot and build the exact house you want. With an FHA Construction Loan you can buy the land and finance the construction loan all in one loan.

This type of loan is what is known as a construction to permanent one-time close loan. This is where you finance the land and the construction all-in-one. If you already own the land, that is okay too, and you can use the equity you have in the land as collateral (down payment).

If you talk to 100 loan officers, probably 99 of them will tell you FHA construction loans do not exist. This is low down payment home loansbecause most lenders don’t deal with FHA Construction loans because they are a bit more labor intensive than regular FHA loans.

FHA Construction Loans definitely exist and can be done. The key is to understanding how FHA construction loans work.

The income, credit, and asset guidelines are the same as regular FHA loans. The difference is having to work with getting your builder approved for this type of financing.

The best part about this type of construction loan is you get approved up front, building get’s done, and you move in. You DO NOT have to go through the approval process again after the home is completed.

Main things to keep in mind with FHA Construction Loan

  • 3.5% down payment
  • 620 FICO minimum
  • Can use existing equity as down payment if you already own the lot
  • Can buy land and finance construction all-in-one loan
[more on FHA construction loans here]

VA Loan | 0% Down

If you’re currently serving in our armed forces, or are a veteran of the US military – thank you for your service to our country. Semper Fidelis

A VA loan is a fantastic 0% down option for a first time home buyer loan, and a great option even if you have bought a home in the down mortgage

There are MANY different levels of eligibility depending on when you served, how long you served, and if you were active or reserve. Here is a chart from the VA to show eligibility.

One huge way the VA has given back to their wounded veterans is with regard to the funding fee affiliated with getting a VA loan.

If you’re receiving any percentage of disability from the VA you’re exempt from paying the VA funding fee – which can save you thousands.

The other benefit is that you do not pay monthly mortgage insurance premiums on VA loans.

There are no maximum income restrictions on VA loans, and VA loans are available in every corner of the US.

Main things to keep in mind with a VA loan

  • Must be an eligible veteran of the US armed forces, currently serving, or an unmarried surviving spouse.
  • Can go as low as 530 credit score in some cases.
  • 0% down payment
  • $0 mortgage insurance (big monthly savings)

Which first time home buyer loan is best for you?

There are clearly plenty of options to choose from, and everyone’s situation is different.

Find out which product meets your needs best today. Apply Here

First-Time Home Buyers Guide: Buying With Student Loans And Debt

I invite you to reach out to me.

Get your questions answered.



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The Mortgage Collateral

The Property Piece of the Mortgage Puzzle

It’ game time. You have the steady job. Your down payment is sitting safely in your bank account. Your credit expert helped you get things cleaned up. You’re now ready to buy a home! It’s time to put together the last piece of the mortgage puzzle, the property. This is where the fun begins. The factors to consider when figuring out what home fits you the best are endless. This should help you gain an understanding, and a snapshot on how the process works when you find the home of your dreams.
The home you are purchasing is the collateral being used to secure the financing you’re getting. If you expect a lender to give the green light to finance a home for you, be prepared for them to perform due diligence as well. Your lender will have certain standards that the property needs to meet. 
Once your Realtor has helped you negotiate an amazing price, it’s time to order the inspection. Although lenders mortgage collateraldon’t typically require a general inspection to be completed by a licensed inspector, it’s highly recommended that you get one yourself. Your Realtor usually will have a couple recommendations of credible inspectors in your area. An inspection can cost anywhere from $300 to $800 depending on the scope of work and the property size. Your inspector will examine each component of the house in order to give an opinion on what meets code (electrical, HVAC), what doesn’t meet code, and what the estimated remaining life of items might be (water heater, roof, furnace). The cost that you pay for an inspection pales in comparison to the value you receive by knowing exactly what you’re “getting yourself into” with a potential home purchase.


Your lender will require an appraisal to be completed, and will submit an order through a third party. There is no need to order your own appraisal because privately ordered appraisals cannot be used or considered by a lender. The cost can vary depending on scope of work and property size. Typically $400-$750. The purpose of an appraisal is to get an opinion of fair market value of a home, and to find out if there are any serious issues with the home (peeling paint, broken windows, mold…). The appraiser will physically go out to the property to do an general inspection, take pictures, and take measurements. The appraiser will pull records of recent sale history for similar properties that have sold within the area of the home you’re buying. He/she will take into consideration the square footage, amenities, condition, age, and other important factors that contribute to value. The appraiser will make specific adjustments to value based on how those factors compare to the actual property being sold. By doing that, the appraiser can make an educated decision of what people are willing to pay for a home that is similar to the one you’re buying. This is called the sales comparison approach. This approach gives the best indication of what the fair market value is because it’s based on what people are actually willing to pay in that given market. If any repairs needed are noted by the appraiser, there is a strong likelihood that those repairs will need to be completed. You don’t necessarily want to make any repairs, nor will you be authorized in most cases, because you don’t own the home yet. What if you spend $100, and a Saturday afternoon installing a rail on a porch, just to find out you can’t close on the home for other reasons? Doesn’t make much sense.

Property Type

  • Single family home – This is your typical stick built, built from the ground up, free standing home. You’ll be required to maintain your own landscaping, snow shoveling, and exterior maintenance. You may or may not have an organized homeowners association (HOA) in your neighborhood. The HOA will help with general street maintenance and neighborhood needs. Be mindful of what the HOA fees are because it can have an impact on your debt-to-income ratio. In some areas you may think you’re buying a single family home, but find out too late that it’s a “site-condominium”. Depending on your loan program, your lender may have to do a more extensive review of the property and HOA if the home is found to be a site-condo.
  • Condominium – This can be a home in a community of 1 or 2 story homes that are attached, or a building of many stories containing units stacked on top of one another (like an apartment building). You own the interiorcollateral mortgage of the home. The exterior is typically maintained by the HOA, so the HOA fees are typically more costly on a condo. There are usually amenities like a pool and exercise facility among other things. Condos are popular for people who want to enjoy the benefits of homeownership, but pass on the headache of maintaining anything outside the home. Condos require a more thorough review than any property type. The lender will examine the financials of the HOA in detail. They’ll look for things like reserves, delinquent owners in the community, and insurance coverage. If you are getting an FHA loan or a VA loan, you can find out what condos are already approved in your area. For FHA approved condos in your area click hereFor VA approved condos in your area click here
  • Townhome – A townhome can be a very similar setup as the condo that’s in a community with 1 or 2 story homes that are attached. With a townhome you do own the land outside but the HOA will cover day to day maintenance usually. Your lender will contact the HOA, but typically will not be as strict on guidelines as they would be on condos.
  • Manufactured home – These are homes that are built in a factory and placed on a piece of property. It can be a challenge to find a lender for manufactured home financing. One of the reasons many lenders do not offer financing on manufactured homes is because manufactured homes typically depreciate in value. In other words, the value of the home will likely decrease over time. Whereas the value in a single family home, condo, or townhome, will typically increase (appreciate). Of course the housing meltdown in recent years has made many people question that fact. But historically, real estate is a great investment, and will appreciate in value.  
  • Multi-unit – any property that is being sold as piece that has several functional dwellings (units). These are duplex (2 unit home), triplex (3 unit home), and fourplex or quadplex (4 unit home). You can obtain a residential mortgage on multi-unit homes as long as they are 4 or less units. Anything with 5 or greater units will require a commercial loan. Multi-unit homes are a great way to supplement your income and have your mortgage paid for by the tenants.

Escrow Account

  • General – Your escrow account is a cushion set aside so that you have adequate funds available to pay your taxes and insurance when they are due. At closing you’ll pay for your full year of homeowners insurance, and several month’s worth of your taxes (depending on the time of year and frequency of taxes due). In your mortgage payments moving forward you’ll pay a fraction of your annual homeowners insurance and taxes. Each payment will contribute to your escrow account so that enough is accumulated when the next tax or insurance bill is due. Your lender will manage your escrow account for you. This keeps things simple for you because you do not have to worry about having to pay a large bill for taxes and insurance two or more times per year. It’s all included in your payment so you have less responsibility to manage. If you have a FHA loan, VA loan, or put less than 10% down, you’ll be required to have an escrow account with your lender.
  • Insurance – You’ll need to obtain an insurance policy to cover unexpected, significant damage on the home. Each property type will have different requirements, and needs that will be covered. Your Realtor and your lender can give you insight on what type of coverage to get. Certainly the insurance agent you choose will be the expert in that field on what coverage you need.
  • Real Estate (property) Taxes – Be mindful of how much the taxes on your property are. This can make a significant difference on your budget and your debt-to-income ratio. Your taxes are likely to fluctuate, which can cause an adjustment in your monthly escrow payment.


With the information you’ve been able to acquire by skimming through the “keeping your home loan process simple” series, you’re now more prepared than the vast majority of home buyers. Use this as a reference. Use it as a tool to come back to as you get closer to being ready to take the next step into the American dream. Subscribe by email to stay in the loop on the latest and greatest info on homeownership, and balanced living.  

A few closing tips…

From Livingston County, Michigan expert, and licensed inspector, Dominic Vagnetti of Inspections on Demand. 517-540-0800


-Roof conditions and foundations are the two most worrisome items for buyers. Roofs are a disposable product and we want to start paying extra attention as they reach their 20th birthday. We are seeing longer lifespans from dimensional (or architectural) designs, however exceptions are always present. Curling, granule loss, missing shingles are things a buyer can see driving up to the property.

-Foundation cracks can be problematic but are most commonly superficial. Look for signs of water leakage that would require injection sealant, gaps larger than 1/4 inch, or horizontal cracks which can be signs of significant movement.

-Foundation waterproofing and drainage are mostly typical of 1970s and newer homes. Prior to that, sump crocks and foundation drain lines were either not present or poorly designed. Signs of water damage or flooding can be found by examining homeowner belongings on the floor or looking for stains on wood walls or shelving. It can be important to differentiate between ongoing flood issues and a single water event like a water heater failure or leak in a pipe.