Manual underwriting is how all loans were evaluated before computer algorithms
took the human logic out of the process. Simply stated, a loan that is manually
underwritten is one where a person evaluates the file for the borrower’s ability to
make the loan payments. For those who have had credit issues in the past that
are easily explained and understood, requesting a manual underwriter may make
the difference between getting the loan or not.
Almost everyone has gone through difficult financial times at some point in life.
Perhaps a divorce or job layoff caused a glitch in the otherwise good credit of the
borrower. A computerized system only catches the credit score and number of
late or missed payments. A good credit risk can turn into a poor one simply
because a computer can’t understand the circumstances which caused the
problem—but a person can.
How Does It Work?
Before an underwriter will approve a loan, they need to understand the
borrower’s ability to pay and their overall financial situation. The loan package
will include bank statements, tax returns, pay stubs, savings accounts, and other
forms of verification.
The underwriter will review the provided documentation and any personal
statement of explanation provided for negative records. They will consider not
just the credit score, but also recent job promotions and special situations which
explain a difficult period in an otherwise perfect record of on-time bill paying. In
short, they can view the overall package from a human perspective and make a
For anyone who has had a difficult financial history due to divorce, job loss, a
death in the family, or failed business, asking for a manual underwriting review
can prove their creditworthiness and obtain a loan that would otherwise have
been out of reach.