No Ratio Mortgage: What You Need to Know

No ratio mortgage

Innovative solutions emerge to cater to the diverse needs of homebuyers and owners. One such option gaining prominence is the No Ratio mortgage. This unique program allows borrowers to qualify without verifying their income, providing flexibility and efficiency for those who don’t meet typical income requirements. In this article we will discuss the eligibility requirements and advantages of the program.

Am I Eligible?

While the no ratio program is unique in not requiring borrowers to verify their employment or income, its eligibility requirements are largely similar to other loan programs. Here are the most significant guidelines for borrowers to know:

  • Must be purchasing or refinancing a primary or secondary home
  • Minimum credit score of 620 
  • Down payment of 20-40% (borrowers with stronger credit can make smaller down payments) for purchases
  • Refinance: Max loan amount of 60-80% of the property’s value for rate-and-term refinance and 55-75% for cash-out
  • 6-9 months of mortgage payments held in reserve
  • No missed mortgage or rental payments in the last 12 months

Advantages of the Program

  • Expands credit access to borrowers with low or irregular income (such as seniors, or commission salespeople)
  • Flexibility for self-employed borrowers with hard to document income
  • Allows homeowners to tap their home equity for cash, even if they’ve lost income
  • 2 year waiting period for borrowers who had a foreclosure or bankruptcy

FAQ

Q: How will the interest rate compare to other loan programs?

A: The interest rate for no ratio loans tends to be higher than programs such as the FHA, VA, or conventional loan but is comparable to other non-QM loan programs.

Q: What documents will I need to provide to qualify?

A: Borrowers looking to purchase will only need to provide current statements for their bank and retirement accounts. Refinance loans will require the current mortgage statement and proof that their home is insured as well.

Q: Will the lender still verify that I am employed?

A: No, your employment history will not be listed on your application.