Conventional Manual Underwriting Guide
When Desktop Underwriter says "Refer," a human underwriter can still approve your conventional loan. Learn how manual underwriting works for Fannie Mae and Freddie Mac loans.
What is Conventional Manual Underwriting?
In simple terms: Conventional manual underwriting is when a human, not Desktop Underwriter (DU) or Loan Prospector (LP), decides if you qualify for a Fannie Mae or Freddie Mac loan. This happens when your financial situation needs a person to look at the nuances.
- DU returns "Refer with Caution" or "Out of Scope"
- No credit score (using non-traditional credit)
- Complex income situations
- Recent credit events requiring explanation
- 2 years of tax returns with all schedules
- 2 years of W-2s or 1099s
- 30-60 days of pay stubs
- Proof of reserves (2-6 months PITI)
DTI Limits (Debt-to-Income)
Conventional manual underwriting has stricter DTI limits than FHA or VA. The maximum DTI depends on your compensating factors and overall risk profile.
| Compensating Factors | Max Housing DTI | Max Total DTI | Reserve Requirement |
|---|---|---|---|
| No Factors | 28% | 36% | 2 months PITI |
| One Factor | 33% | 41% | 2 months PITI |
| Two+ Factors | 36% | 45% | 2-6 months PITI |
| Strong Profile* | 38% | 50% | 6+ months PITI |
* Strong profile: 720+ credit score, 6+ months reserves, multiple compensating factors
Conventional Compensating Factors
Cash Reserves
2-6 months of PITI in liquid assets
Low DTI
DTI significantly below max guidelines
Minimal Payment Increase
New payment ≤ 5% more than current
Additional Income
Documented income not used for qualifying
Strong Credit History
720+ score, no late payments 24 months
Employment Stability
2+ years same employer or field
LTV & Credit Score Requirements
Conventional manual underwriting has specific LTV limits based on credit score and property type. PMI is required for LTV above 80%.
| Credit Score | Max LTV | Min Down Payment | PMI Required |
|---|---|---|---|
| 740+ | 97% | 3% | Yes (if >80%) |
| 700-739 | 95% | 5% | Yes (if >80%) |
| 680-699 | 90% | 10% | Yes (if >80%) |
| 620-679 | 80% | 20% | No |
| No Score (NTC) | 80% | 20% | No |
Primary Residence
- 1-unit2 months PITI
- 2-4 units6 months PITI
Second Home / Investment
- Second home6 months PITI
- Investment property6 months PITI
Conventional vs. FHA vs. VA Manual Underwriting
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Min Credit Score | 620 | 500 | None* |
| Max DTI (with factors) | 45-50% | 50% | 50%+ |
| Min Down Payment | 3-20% | 3.5% | 0% |
| Mortgage Insurance | PMI (cancellable) | MIP (life of loan) | None |
| Key Focus | Reserves & Credit | DTI Tiers | Residual Income |
* VA has no minimum credit score requirement, but most lenders require 580-620
Ready to See If You Qualify?
Use our DTI Calculator to check your ratios or speak with a loan specialist who understands conventional manual underwriting.
Frequently Asked Questions
Common questions about conventional manual underwriting
Disclaimer: This information is provided for educational purposes only and is based on Fannie Mae and Freddie Mac guidelines as of 2026. Actual loan approval is subject to lender requirements, property appraisal, and other factors. Guidelines may change. Consult with a licensed mortgage professional for personalized advice. NorthStar Funding NMLS #139369.