Manual Underwriting Explained (2026 Guide)

2025 Update: Winter is now the toughest season for mortgage approvalslenders tighten credit boxes, automated underwriting issues spike, and more buyers get pushed into manual underwriting reviews.

If you're applying between November and February, expect stricter document checks, slower AUS approvals, and higher chances of being asked for a manual underwrite, especially if you have:

• no credit score or thin credit,
• a DTI above AUS limits,
• past bankruptcy or Chapter 13,
• VA or FHA scenarios with layered risk.

The good news? Manual underwriting approvals rise in winter because lenders rely more on human review. With the right preparation, you can get approved smoothly-and often faster-than AUS.

Ready to buy a home this winter? Get pre-approved in minutes.

Winter is historically the tightest lending season of the year. Between holiday staffing shortages, year-end credit tightening, and stricter automated underwriting (AUS) outcomes, more buyers-especially those with thin credit, no score, high DTI, or VA/FHA loans-get redirected to manual underwriting.

Here are the biggest 2025 challenges buyers face this winter:

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From November through January, lenders reduce risk exposure to close out the year. This leads to:

• Stricter DTI tolerance
• Higher credit overlays
• More AUS “Refer” findings
• More files requiring manual underwriting

This affects borrowers who are:

• Self-employed
• Have limited credit history
• Recently recovered from credit events
• Applying for FHA, VA or USDA loans

Manual underwriting becomes the human exception path when AUS becomes overly rigid during winter.

Winter underwriting slows down due to nationwide verification bottlenecks:

• Employers delay VOE (Verification of Employment)
• IRS transcript turnaround increases
• Bank updates lag during holidays
• Appraisal and title timelines stretch

Manual underwriters rely heavily on these documents, so delays stack up-making pre-prep and document readiness essential.

Lenders especially tighten requirements for borrowers with:

• No credit score (“NA” or “Insufficient File”)
• Limited trade lines
• Non-traditional credit
• Recent new credit activity

During winter, underwriters request stronger alternative trade lines such as rent, insurance, utilities, or recurring subscriptions to validate repayment ability.

VA loans spike in winter because many AUS systems struggle with:

• Residual income calculations
• Limited credit depth
• Debt-to-income layers
• Non-traditional work patterns (common among military families)

This results in more VA files being routed to manual underwriting manual-but that’s actually an advantage:

Although the season is more challenging, manual underwriting gives winter buyers major benefits:

• Human review instead of rigid algorithms
• Approval paths for no-score borrowers
• More flexibility after holiday spending dips credit scores
• More exceptions for borderline DTI
• Higher approval odds for VA and FHA buyers

For buyers with imperfect credit, winter can still be a powerful window-if you have your documentation prepped ahead of time.

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Manual underwriting moves slower in winter due to year-end staffing and verification delays. The best way to speed up your approval is to prepare every document upfront so your file can move through underwriting without pause.

Below is a practical Manual Underwriting Checklist that helps you avoid common delays and strengthen your approval odds-especially if you have no credit score, thin credit, higher DTI, FHA/VA requirements, or past credit events.

Underwriters need complete proof of stable income. Prepare:

• Recent pay stubs
• W-2s
• 1099s (if self-employed or contractor)
• Two years of tax returns

Incomplete income documents are one of the biggest reasons winter approvals stall.

Manual underwriting requires a full two-year employment timeline, even if you switched roles.

Include start dates, end dates, and explanations for any gaps longer than 30 days.

For buyers with no score or thin credit, rental history becomes one of the most important compensating factors.

Provide:

• 12 months of rent payments
• Bank statements showing deposits
• Landlord verification, if available

Winter underwriting puts more weight on alternative trade lines. Collect proof of at least 2–3 recurring payments, such as:

• Utilities
• Auto insurance
• Cell phone or internet
• Streaming subscriptions
• Childcare tuition

These help replace a traditional credit score.

If you’re applying for a VA loan-especially common in winter due to flexible manual underwriting rules-have your COE (Certificate of Eligibility) ready.

This prevents delays and boosts approval speed.

For FHA buyers routed to manual underwriting, prepare evidence of:

• Stable income over 3+ years
• Low payment shock
• Strong rental history
• Additional savings reserves

These compensating factors can override borderline AUS findings in winter.

Holiday transfers and large deposits can trigger extra scrutiny.

To avoid delays:

• Document your down payment source
• Include bank statements covering deposits
• Provide a signed gift letter if funds came from family

Manual underwriters will review your most recent 60 days of bank activity.

Make sure statements are clear, consistent, and without unexplained large deposits.

Assets strengthen your file-especially in winter when lenders tighten risk models.

Gather documentation for:

• Savings accounts
• Retirement accounts
• Brokerage accounts
• Cash reserves

For quick prep, you can still run your numbers using:

• Mortgage Calculator
• Affordability Calculator

These help verify whether your income, debt, and credit profile align with manual underwriting guidelines.

Knowing the mortgage pre-approval process can help you prepare for manual underwriting and increase your chances of approval.

When you want to initiate a loan, the lender will decide whether you qualify for the loan based on your information. In most cases, a computer program verifies the information and checks whether you can pay back the loan.

If you are self-employed, applying for a jumbo loan or Federal housing loan, then the algorithm will reject your application. This is where manual underwriting will come into the picture. 

Manual underwriting is a process where the lender manually underwrites and reviews the loan application. The lender looks at factors like the debt-to-income ratio, credit score, assets, liabilities, etc.‍

Lenders usually underwrite a home loan when automatic underwriting becomes difficult. Below are some scenarios where lenders start underwriting home loan.

1. No credit history: If you don’t have a credit score, then a manually underwritten loan is a great option to get a mortgage. The no credit score loan can be approved without any metric necessitated for a loan approval.
2. Minimal credit history: If you don’t have a long credit history, then the automated system will not allow you to make decisive decisions on your creditworthiness.
3. High debt-to-income ratio: If you have a high DTI, you will usually not qualify. If you can get the manual underwriter proof of how you can pay off the loan, they can approve it.
4. Have a foreclosure or bankruptcy on record: Having a bad record on credit makes it difficult to get automated loans. A lender may underwrite your loan if you have a strong source of income and put in a large down payment

A manual underwriting is similar to an automated underwriting. The only difference is that the underwriting mortgage process will take more time and more questions from the lender. Let us look at how it works below:

• Document submission: The lender will ask for financial documents, such as bank statements, pay stubs, tax returns, or investment account statements. You’ll also be required to provide proof of employment and verification of your assets.
• In-depth review: The lender will look into the documents and check your overall financial profile. They are likely to scrutinize your payment history, check for any debts, income stability, and your ability to make mortgage payments.
• Open communication: The underwriter will examine your information and ask questions. This is a standard part of the process and try to answer the questions truthfully.
• Receive a decision: This is the final stage of manual underwriting mortgage loans, where the lender denies or approves your application.

If you're using gift money for a down payment, a gift letter is often required for manual underwriting. Learn how to properly document gifted funds.

If you're approved through manual underwriting but want to lower payments later, a mortgage recast might be a great financial tool to consider.

There are different types of underwriting processes based on the type of loan you are applying for:

• Conventional loans: A conventional loan needs to meet the requirements of the Federal Housing Finance Authority (FHFA). This allows government-backed enterprises like Freddie Mac and Fannie Mae to buy in the secondary mortgage market. Typically, they use automated underwriting, but some exceptions allow for a manual process.
• Jumbo loans: Jumbo loans are non-conforming, so they are lenient towards regulations. This is why jumbo loans are common for manual underwriting, especially those for large amounts.
• Government-backed loans: Most government loans follow automatic underwriting, but manual underwriting is permitted or required in some cases. For example, FHA manual underwriting guidelines require applicants to have a credit score below 620 with a DTI ratio exceeding 43%.

Here are the differences between manual and automated underwriting.

Manual underwriting isn’t “bad”-it’s simply a more personalized approval path, especially for borrowers with no credit score, thin credit history, higher DTI, or past financial events. While the process can take longer than automated underwriting, it often provides higher approval odds during winter when AUS systems tighten.

Your lender may route your file to manual underwriting automatically if you have limited credit, recent credit challenges, or you’re applying for FHA or VA financing. If yhigher approval oddsou need help finding a lender who actually performs manual underwriting, reAlpha can help you.

If you’re approved manually but want better long-term rates, you can always refinance once your credit profile improves.

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