No ratio loans are loans which do not require the applicant to state their income nor will it be verified by an underwriter. There are many benefits for individuals who qualify for this type of mortgage.

An example of a no ratio loan is used when a couple's income is coming from a newly established career or job change. One person would be on the loan, with no income being reported on the application. Since no income is reported, there is no debt to income ratio being used. Hence the term "No Ratio"

A more common scenario in a loan program with a no ratio feature would be this. The borrower must provide full proof of both employment (or self employment) and income, but the underwriter ignores the debt to income ratio. A program like this is mainly utilized by borrowers whose debt to income ratios would be too high to qualify under traditional underwriting guidelines. These no ratio loans will usually have slightly higher interest rates and/or origination fees.

Many loan officers offer stated-income to mark up the borrowers' income. However, marking up the income without good rationale is not only unethical but also fradulant. For the peace of mind, it is recommended to use the no-ratio method instead of the stated-income method when appropriate although the interest rate is slightly higher. Your loan officer will provide the information on both methods.

 

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