What Is a DU in Real Estate And How Does It Work?

Photo of author
Written By Justin McGill

DealBloom aims to share the latest tips and strategies to help realtors, brokers, loan officers, and investors navigate the world of real estate.

If you’re wondering, “what is a DU in real estate?”, then this blog post is for you! I remember when I was first starting in the real estate business, I had no idea what is a DU in real estate. Thankfully, my mentor took the time to explain it to me and now I’m here to share that knowledge with you!

What is a DU in real estate?

Fannie Mae’s Desktop Underwriter program is designed to help assess a borrower’s risk for a loan. This is done by taking into account various elements, such as:

  • Property price
  • Borrower’s income and resources
  • Borrower’s employment information
  • Borrower’s debt

These sources are used to determine whether the borrower qualifies for a loan. If they do, the system will automatically approve it.

The desktop underwriter is an automated system that lenders use to determine mortgage eligibility. It allows them to use their logic and algorithms to make lending decisions.

With desktop underwriting, you can secure a loan without worrying about discrimination against your race, gender, or skin color.

If you are unable to receive automated approval through Desktop Underwriter, you may need to pursue manual underwriting to secure your loan.

The Desktop Underwriter (DU) framework for mortgage evaluation is for both regular and government loans. The Federal Housing Administration (FHA) also uses this metric.

How Does Desktop Underwriting Work?

Form 1003 is a standard mortgage application form that is used by most lenders in the United States. The form asks for information about the borrower, the property being purchased, and the terms of the loan.

Borrowers will need to provide employment information, monthly income, assets, and liabilities. The form also asks for details about the transaction and declarations from the borrower.

To assess whether or not an applicant is eligible for a loan, Desktop Underwriting (DU) relies on data that corresponds to various sections of Form 1003. This information is then cross-referenced with over 75 different third-party vendors to determine the level of risk involved in approving the loan.

The buyer’s reported income is not verified. Therefore, a seller cannot determine if the buyer can afford to buy the home.

The lender will not require any income verification until the application process begins. If your financial situation changes, you can reapply.

The more information you put into your application, the better your chances are of getting your home loan approved. Incorrect or missing data can ruin your chance of being approved.

The DU also doesn’t address federal compliance. That is up to the lender.

What Does Desktop Underwriting Cover?

A major part of the loan approval process involves looking at your credit history and debts. This plays into whether the lender can trust you to pay them back on time.

Here’s how it works:

Your credit score, or FICO score, is one of the factors that will be considered when determining your eligibility for a loan. However, you don’t need to go online and buy your FICO score report.

Third-party vendors, such as credit bureaus, collect this information.

The score you see in your free credit report is often different from the three-digit number that creditors and insurers typically use. The three highest and the three lowest numbers are usually tossed out.

FHA mortgages tend to have more lenient credit requirements than loans that are sold on the secondary market to Fannie Mae. This is because borrowers with higher credit scores are typically offered lower rates and favorable financing. On the other hand, those with lower credit ratings tend to pay higher rates.

Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes towards paying your debt. This percentage is used by lenders to determine your maximum monthly mortgage payment.

Your debt-to-income ratio includes both your front end and back end.

The front-end ratios take into account your entire mortgage payment about your gross monthly income. This includes your PITI (principal, interest, taxes, and insurance) as well as any private mortgage insurance or mutual mortgage insurance you may have.

If the home is part of a homeowners association, you’ll have to pay monthly dues.

The back-end ratio is the ratio of your total monthly debts to your total monthly income. This takes into account all your monthly housing costs, as well as all your credit card and loan bills.

If you have a lot of debts, such as credit cards or loans, your back-end ratio will be higher.

The lower the ratio, the better your chances of approval for a loan. If your ratio is high, you are less likely to get a loan.

If your back-end ratio is approaching 50%, it might be a good idea to pay down some of your debt before applying for a mortgage.

Do I Need Desktop Underwriting?

Being approved for a home loan by a lender’s underwriting department is a crucial step in the home-buying process. For the majority of buyers, the approval provided by a Fannie Mae or Freddie Mac loan is absolutely essential.

Most people can’t buy a home without taking out a mortgage loan, so being approved by the lender is the final step in completing the sale.

Once your information has been entered into the DU, it will automatically approve or deny your request. If approved, it will also tell you what additional documentation is required.

If additional documentation is needed, the mortgage underwriter can submit the DU again.

You will need to complete a Desktop Underwriting (DU) in order to close on your loan. The DU will list several conditions that must be met before the loan can close. Once you have met all of the conditions, the loan will be cleared to close.

A lender will not provide your real estate agent with a credit report without your permission. This is because it reveals your intimate financial situation.

For buyers in hotter markets, having a preapproval DU letter can be advantageous. It’s more convincing than a pre-approved mortgage application, and it gives the seller more peace of mind that you’ll be able to secure the financing necessary to complete the sale.


DU in real estate stands for desktop underwriting. Fannie Mae uses its desktop underwriter software to determine whether borrowers are qualified for loans. So now you know – when someone asks you “what is a DU in real estate,” they’re really just asking about home loan approval.

Justin McGill