No Ratio Mortgage
| A No Ratio Mortgage is a useful option if you are carrying more debt than a traditional mortgage loan will allow. In traditional mortgage banking your debt to income ratio is one of the key factors in determining loan approval. Your debt ratio is calculated by dividing your total monthly payments by your monthly pre tax income. If your ratio is 40% or more, a traditional mortgage is very difficult without pristine credit and very substantial reserves. With a No Ratio Mortgage, no income information is included with the application so no ratio calculations are made. I use the program when a client's current income is low relative to their debt or, more frequently, the client has income which is impossible to verify. As all other information on the application is verified, the No Ratio Mortgage is a "middle ground" product between a Stated Income and true No Doc mortgage but may be a good choice for you. |
Available No Ratio Loan Terms
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No Ratio Mortgages are available as:
15 or 30 year fixed rate require only 10% equity and the rate will not change.
Home Equity and Second Trust programs are available.
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Allowable Use and Property Types
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No Ratio Mortgages are available for Single Family, Townhouse, some manufactured housing, and low rise condos. Some programs allow high rise condos 2-4 unit buildings, second homes, or investment properties but are slightly more expensive or require more equity. Allowable uses are for purchase or rate and term refinance. The programs will allow a "cash out" refinance but there are limitations on the allowable cash back. Please contact me with the specifics of your situation for guidance. If you are unsure a No Ratio Mortgage is the right answer for you, I have included a page on traditional mortgage documentation requirements which may be useful.
The fundamental thing to keep in mind with true NO Doc Mortgages is that the lender only has your credit profile and property to evaluate. If your situation allows verification of either employment or assets you will save some money because you have lowered the lenders risk. The choice is yours.
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Underwriting Guidelines
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Some general guidelines for a No Ratio Mortgage.
- Minimum middle credit score is 640
- 5 credit accounts are required. 3 may be from alternative sources-utility, auto insurance, etc.
- Bankruptcy and foreclosures must be discharged for 3 years with reestablished credit
- Two years employment with same employer
- Two months PITI reserves are required with an LTV <=80%. 6 months reserves are required otherwise.
- 10% minimum down payment is required from your own funds. No gifts.
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