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. Subprime Loan

    A type of loan that is offered at a rate above prime to individuals ...
  3. Default Risk

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

    A lending risk assessment ratio that financial institutions and ...
  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. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Credit & Loans

    What are the pros and cons of owning an equity REIT versus a mortgage REIT?

    Learn about investing in equity, mortgage and hybrid REITs. Explore the different strategies REITs employ to generate income and create dividends.
  5. Credit & Loans

    What is the debt ratio for an FHA loan?

    Borrowing through the Federal Housing Administration requires individuals to provide proof of income as well as information relating to total outstanding debt.
  6. Home & Auto

    What factors should I consider when shopping for the best mortgage lender?

    Comparing lenders to obtain the best mortgage loan requires research and willingness to shop around for the best loan to fit individual needs.
  7. Credit & Loans

    Buying A House? Avoid These 7 Mistakes

    Owning your own home gives you a feeling of independence that renting can’t offer, and there are big financial benefits, too.
  8. Professionals

    Should Your Retiring Clients Pay Off A Mortgage?

    Should your retiring clients pay off their mortgages? It's more complicated than 'yes' or 'no,' so here's a quick guide.
  9. Savings

    Where To Get A Mortgage If You Have Bad Credit

    Here's where to go if you have a low credit score and still want a mortgage.
  10. Credit & Loans

    5 Ways To Get The Best Mortgage Rates

    A mortgage is the biggest loan most people have. Be sure you get the best possible terms – you'll be paying it off for years.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center