No Ratio Loans - No Ratio loans do not require income to be stated on the application nor is it verified. The No Ratio loan does not take into consideration your debt-to-income ratios. This type of loan is perfect for someone that has high debt ratios. You can get up to 100% financing with no ratio loans depeding on your credit.Borrowers with good credit history could qualify for no ratio loans. Often 100% financing is offered by many lenders, however, the interest rates are always higher than the loans with less than 100% financing.
No ratio loans are great for investors, individuals who do not want to deal with the hassle of providing a lot of income documentation, borrowers with potentially higher than normal debt to income ratios, borrowers who have hard to document income, borrowers who are self employed or commissioned, and many other home loan scenarios. Keep in mind that along with the reduced documentation you will generally be required to pay a higher interest rate which equates to a higher mortgage payment. Ask your mortgage professional to show you the difference in rates and payments between utilizing a full income documentation program and a no ratio program.
No ratio option allows borrowing more than a borrow would normally qualify. So, it is important for each borrower to determine how much they could truly afford to prevent potential personal financial disaster.
This is a great program for getting around ratio issues. Especially if you can't "state" income due to job type and not being able to "state" a high enough, beleivable income.
This is also great for investors that have good income but ratios are out of whack due to "negative rent" on other investment properties.
A no ratio loan typically carries a slightly higher interest rate due to the fact your income is not a factor in the loan qualification process.
These loans are usually only available to borrowers with very good credit scores or borrowers who are borrowing a lower percentage of the value of their property. The underwriting theory would be that the added risk associated with not factoring the income ratios is offset by the good credit or low loan to value.
Many property rehab projects, or quick construction projects are financed with no ratio loans.
You are responsible for providing an accurate figure when the loan officer ask's for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable under the law.
No ratio is an excellent option for self-employeed borrowers, who can actually afford the payments, but who have problems documenting the income. For example, a businessperson who owns ten stores will have difficult time documenting the income even though his/her income is high enough to qualify for a fully documented loan program.
Even though incomes are not disclosed by the homeowner or verified by the lender, the source of income, the homeowner's employment, is still verified.
No Ratio Loans are actually much easier to process for everyone involved in the transaction because there is less paperwork. You have no income documentation/verification along with no assett documentation/verification.
No Ratio Loans - No ratio loans are loans which do not require the applicant to state their income nor will it be verified by an underwriter. There are many benefits for individuals who qualify for this type of mortgage.
Many loan officers offer stated-income to mark up the borrowers' income. However, marking up the income without good rationale is not only unethical but also fradulant. For the peace of mind, it is recommended to use the no-ratio method instead of the stated-income method when appropriate although the interest rate is slightly higher. Your loan officer will provide the information on both methods.
An example of a no ratio loan is used when a couple's income is coming from a newly established career or job change. One person would be on the loan, with no income being reported on the application. Since no income is reported, there is no debt to income ratio being used. Hence the term "No Ratio"
A more common scenario in a loan program with a no ratio feature would be this. The borrower must provide full proof of both employment (or self employment) and income, but the underwriter ignores the debt to income ratio. A program like this is mainly utilized by borrowers whose debt to income ratios would be too high to qualify under traditional underwriting guidelines. These no ratio loans will usually have slightly higher interest rates and/or origination fees.
No Ratio vs Stated Income - No Ratio Loans are available for who wish to qualify for a mortgage without any true income requirements. On the application you would not state your income at all, but may be required to verify your assets.
Stated Income documentation programs are available to borrowers who have trouble documenting their adjusted gross income, but unlike No Ratio programs, the stated income still must be used to "qualify" for the loan.
With a stated income loan you are required to list the amount of income that you truly make on your loan application. The advantage of a stated income loan is reduced income documentation is required for these types of loans. The reduction of income documentation will usually result in a slight rate bump. Now if you are a teacher at a public school and try stating that you make $300,000/year on a stated income loan, that is not reasonable for your line of work and an underwriter would question this. Now on a no ratio loan, you simply do not list an income amount at all on your loan application and no debt to income ratio is ever calculated. Obviously this is a bit of a higher risk loan and there is usually a bigger rate bump than on stated income loans due to the higher risk. Therefore, before you state an inflated income on a mortgage loan application and lie on your loan application ask if you might qualify for a no ratio income loan instead. Your job and job history will still be verified with a no ratio loan, however your income will not be requested nor verified.
Sometime problems arise when the stated income may not make sense for the person particular field of employment. By using a No Ratio Loan that problem can be solved.
Home
