What is a No Income / No Ratio loan?

Unlike traditional mortgages, "No Income No Ratio" loans do not require income or debt-to-income ratio (DTI) verification to qualify. Instead, other factors are used to approve you for the loan such as your credit score, assets, the loan-to-value (LTV), downpayment amount, and the amount of reserves you have available.

How to qualify for a No Income No Ratio loan

A "No Income No Ratio" loan is a type of mortgage that doesn't require the you to disclose your income or debt-to-income ratio (DTI) during the application process. These loans are considered non-QM (Non-Qualified Mortgage) because they do not meet the standard criteria set by traditional lenders or government-backed mortgage programs like FHA, VA, or conventional loans.

Here are some key features of No Income No Ratio loans:

1. No Income Verification: With No ratio loans, the borrower does not need to provide documentation of their income. This can be advantageous for borrowers who have non-traditional income sources or difficulty in documenting their income through standard means (such as self-employed individuals with variable income).
2. No DTI Ratio Calculation: Traditional mortgages require lenders to assess the borrower's ability to repay the loan by calculating their debt-to-income ratio (DTI). No Income No Ratio loans bypass this requirement, hence the "No Ratio" part of the name. This can benefit borrowers who have high DTI ratios due to existing debts or obligations.
3. Higher Interest Rates: Because No Income No Ratio loans pose a higher risk to lenders due to the lack of income verification and DTI assessment, they typically come with higher interest rates compared to traditional mortgages. Borrowers should be prepared for potentially higher monthly payments.
4. Shorter Loan Terms: No Income No Ratio loans often have shorter loan terms, such as 15 or 20 years, compared to standard 30-year mortgages. This can result in higher monthly payments but may allow borrowers to pay off the loan faster.
5. Limited Availability: No Income No Ratio loans are not as widely available as traditional mortgage options. They are often offered by specialized lenders who focus on non-QM loans and may require a higher down payment or other compensating factors to mitigate the risk.
6. Risk Considerations: Borrowers should carefully consider the risks associated with No Income No Ratio loans, including the potential for higher costs and the importance of ensuring they can comfortably afford the monthly payments without the traditional income and DTI verification.

Since No Ratio mortgages are considered non-Qualified Mortgages (non-QM), they are designed for borrowers who may not meet traditional underwriting standards but have compensating factors that demonstrate their ability to manage a mortgage responsibly. It's crucial to thoroughly understand the terms and conditions of the loan, including interest rates, fees, and potential risks, before committing to a No Ratio mortgage. Working with a knowledgeable mortgage advisor can provide valuable guidance tailored to your specific circumstances.