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. Low / No Documentation Loan

    A category of loans which generally fall into the Alt-A sector ...
  4. Default Risk

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

    A lending risk assessment ratio that financial institutions and ...
  6. Alt-A

    A classification of mortgages where the risk profile falls between ...
RELATED FAQS
  1. What is the difference between an Equity REIT and a Mortgage REIT?

    There are several types of real estate investments trusts (REITS) that investors can purchase, including equity REITS and ... Read Full Answer >>
  2. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  3. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  4. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
  5. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
  6. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
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. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.
  5. Credit & Loans

    How To Finance Foreign Real Estate

    If you don't pay cash, financing real estate abroad is likely to cost more than at home. Watch for local laws and be sure your rights are protected.
  6. Credit & Loans

    Save? (Or Prepay Your Mortgage Or Student Loan?)

    With low-interest rate loans, you might be better off paying just your monthly minimum and investing whatever extra funds you have.
  7. Credit & Loans

    Not a U.S. Citizen? A Home Loan is Still Possible

    Many banks and mortgage companies offer conventional and FHA home loans to non-U.S. citizens, if they can verify their work history and financial status.
  8. Credit & Loans

    Is it Worth Saving Up for a Bigger Down Payment?

    There are numerous low-down-payment mortgage options out there, but sometimes it makes sense to build up your savings so you can borrow less.
  9. Credit & Loans

    Is A 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.
  10. Credit & Loans

    What Are The Pros and Cons Of A 15-Year Mortgage?

    The shorter term, and higher monthly payment, are only part of the picture.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center