No-Ratio Mortgage

AAA

DEFINITION of '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 EXPLAINS 'No-Ratio Mortgage'

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
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Default Risk

    The event in which companies or individuals will be unable to ...
  3. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and ...
  4. Subprime Loan

    A type of loan that is offered at a rate above prime to individuals ...
  5. Alt-A

    A classification of mortgages where the risk profile falls between ...
  6. No Documentation Mortgage - No ...

    A type of reduced-documentation-required mortgage program in ...
Related Articles
  1. How Mortgage Refinancing Affects Your ...
    Credit & Loans

    How Mortgage Refinancing Affects Your ...

  2. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  3. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

  4. What You Need To Know About Fannie Mae ...
    Investing Basics

    What You Need To Know About Fannie Mae ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center