Today, most every single loan application is underwritten by submitting the application through the automated underwriting system, or AUS, before asking for loan documentation. The AUS was introduced years ago. So how did loan applications get approved before the advent of the AUS?

Everything was done manually. But before the approval process began, pretty much everything a lender could possibly need was asked for in advance. That means copies of paycheck stubs, W2s, bank statements and more. Documents were provided even if they were ultimately not needed.  The application wouldn't get out of the starting gate without all this documentation. When the documentation was submitted, the underwriter would first make sure what was submitted was what was originally asked for. 

Further, once the application was fully submitted, the loan file simply got in line and waited its turn for a review. Depending upon the volume, it might take a couple of weeks before the file gets looked at. It really doesn't take long to manually underwrite a file, it just takes time for the underwriter to review previously submitted applications.

The underwriter, satisfied that all needed documentation was with the original application  package, would then proceed. It took no more than a couple of hours to approve the loan. Even then, there could be a 'conditional' approval. This means the underwriter would move forward with an approval but still require some other item(s) to be brought to the signing table. The applicants would provide any additional documents and the file would then be returned to the lender for a final review. All these steps meant loan applications could be in process for 30-45 days. The AUS changed all that.

The AUS digitizes an application or receives the application from a website (typical). It is submitted and then within a matter of  moments a decision is rendered. On the decision document, it will list items needed prior to closing. Instead of submitting everything upfront 'just in case,' applicants now wait for the decision to find out what needs to be provided, if anything.

Applicants with higher credit scores and a larger down payment will be asked for much less in today's environment compared with the manual process. There are still a few needed materials, just much less. The difference between an  AUS and a manual underwrite is time and paperwork. Today's manual underwrites occur typically when there is a bankruptcy listed in the past or other negative items. A lender can still approve a rejected loan application with a manual review, it's just that these loan applications take more time in which to approve due to the manual process.

Today, most every application submitted goes through some form of automated underwriting.