No Ratio Loans: A True No Doc Financing Option

A "No Ratio Mortgage" loan offers an attractive financing solution for borrowers who don't fit the traditional underwriting rules from banks and lenders. These loans cater to individuals with non-traditional income sources or those who prefer not to disclose their income or employment. This comprehensive guide will explore the intricacies of no ratio loans, their requirements, and how they differ from conventional mortgages.

No ratio mortgage application

What Are No Ratio Home Loans?

No ratio loans are a type of non-qualified mortgage (non-QM) that doesn't require borrowers to provide any income or employment documentation. Instead of relying on pay stubs, W-2 forms, and job verification, lenders assess the borrower's ability to repay based on other factors such as liquid assets, mortgage or rent payment history, credit scores and overall credit history.

These loans are particularly beneficial for:

Key Features of a No Ratio Mortgage Loan?

No ratio loans offer several distinct features that set them apart from conventional mortgages and other non-QM products.

Requirements for a non-QM No Ratio Loan

Credit Scores

  • 680 and up credit scores
  • 740+ credit scores get best terms
  • No mortgage/rent 30-days past due in the last year

Down Payment

  • 20-30% down payment
  • Maximum loan is $2 million

Liquid Assets

  • 9-12 months of P.I.T.I reserves
  • Down payment & closing costs

Property Type & Use

  • Single family home, condo, townhome
  • Primary home or second homes ONLY

Note: These requirements apply to both purchase and most refinance transactions. A refinance with cash out is capped at 70 LTV and credit scores must be over 700. Loan amounts above $1.5 million require higher down payments and possibly 12 months of cash reserves. Guidelines above are subject to change.

Pros and Cons of No Ratio Loans

Advantages

  • Income: Ideal for those with non-traditional or fluctuating income
  • Asset friendly: Allows high-net-worth individuals to leverage their assets
  • Fast approval process: Less documentation leads to quicker closings
  • No DTI limits: Benefits borrowers with high DTI but substantial assets

Disadvantages

  • Higher interest rates compared to traditional mortgages due to higher risk
  • Higher fees from the higher risk
  • Higher down payment of 20-30%
  • Higher minimum credit scores

See the Differences Between Traditional, No Ratio and Bank Statement Loans


Feature Traditional Loan No Ratio Loan Bank Statement Loan
Income Documentation W-2s, paystubs, tax returns None Account statements (12-24 months)
Required Verification Income, employment & housing payment (1 late maximum) No job or income. Just housing (no late payments in 2 years). Self-employment for 2 years. Housing (1 late payment 13-24 months ago)
Credit Scores As low as 620 680 660
Minimum Down Payment 5% to 10% 20% to 30% 10% to 15%
Loan Limits $5 million $2 million $5 million
Interest Rate (examples) 6.25% 9.125% to 9.625% 6.875% to 7.25%

Begin the Process with an Expert in Specialty Mortgage Loans

As a licensed mortgage professional with over 10 years of successful closing of non-QM loans for clients, I can find the right solution. No Ratio home loans are ideal for liquid asset rich borrowers who have 700 and up credit scores.

Still have questions about this loan product?    Check these answers

Disclosure: Minimum loan amount is $200,000 for residential non-QM loans. Loan guidelines are subject to change per lender at any time until the loan is approved and the rate is locked. Borrowers must be approved by underwriting. Not all applicants will qualify.