What Are No Ratio Mortgage Loans?

No ratio home loans are a type of non-qualified mortgage (non-QM) that doesn't require borrowers to provide any income or employment documentation.
So your debt to income ratios are not calculated. So you will not be denied due to high debt-to-income ratios.

Instead of qualifying using pay stubs, W-2 forms, tax returns, and job verification, lenders assess the borrower's ability to repay based on other factors such as the amount of your liquid assets, mortgage or rent payment history, credit scores and overall credit history.


These loans help a range of borrowers:

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
  • 0 mortgage/rent 30-day lates last yr

Down Payment

  • 20-30% down payment
  • Maximum loan is $2.5 million

Liquid Assets

  • 6-12 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 9 months of cash reserves. Guidelines above are subject to change.

The Pros and Cons

 

Advantages

  • Ideal if you have low or fluctuating income
  • Allows borrowers to leverage their liquid assets
  • Fast closing due to less documentation
  • No DTI restrictions

Disadvantages

  • Interest rates 2.5-3% above traditional mortgages
  • Higher fees from the higher risk
  • Higher down payment of 20-30%
  • Higher minimum credit scores

Differences of No Ratio and Other Loans


Feature No Ratio Loan Traditional Loan Bank Statement Loan
Income Documentation None W-2s, paystubs, tax returns Bank account statements (12-24 months)
Required Verification No job disclosed. No 30-day late payments home/rent last 12 months. Income, employment & housing payment (1 30-day late maximum) Self-employment for 2 years. Housing (1 30-day late payment 13-24 months ago)
Minimum Credit Score 680 As low as 620 660
Minimum Down Payment 20% to 30% 5% to 10% 10% to 15%
Loan Limits $2.5 million $5 million $5 million
Interest Rate (examples) 8.75% to 9.375% 5.625% 6.00% to 7.25%

Begin the Process with an Expert

Over 10 years of closing non-QM loans for clients.

People are asking

What would disqualify me for this loan?+
If your qualifying liquid assets are not suffficient or you have a mortgage or rent late payment over 30 days late in the last 12 months that would make you ineligible.
Can I buy down the interest rate?+
Unfortunately not. The interest rates are set on this special CDFI program and based on your credit score and down payment.
What is the benefit of this loan over a bridge loan?+
This loan's fees and rate are similar to a bridge loan yet there is no debt ratio to calculate unlike "some" bridge loans for a primary home where it is used to qualify. Many use a no ratio loan to buy or refinance the home and then refinance to lower their rate in 6 months to a year later.

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.