No-Ratio Mortgage
A mortgage program in which a borrower's income isn't used or reported in qualifying the borrower for the mortgage under the standard debt-to-income ratio requirements. The loan is usually made based on the borrower's down payment, credit score or assets. Investopedia Says:
This type of mortgage is often chosen by individuals who don't want to disclose their incomes or who have highly variable incomes. However, this mortgage option will typically come with a higher rate than a mortgage that verifies income.
No-ratio mortgages usually fall into the Alt-A classification. Under Alt-A lending practices, certain exceptions to traditional mortgage underwriting guidelines - such as a debt-to-income ratio requirement - are made based on risk-based pricing. In other words, the lack of a debt-to-income ratio is a risk factor that is used in determining the mortgage's interest rate. Related Terms:
Alt-A
Default Risk
Loan To Value Ratio - LTV Ratio
Low / No Documentation Loan
Mortgage
No Doc Mortgage
Subprime Loan |