No ratio mortgages for a home you live in

A no ratio mortgage does not use a debt to income ratio. Most lenders must check your income on a home you live in, under the federal ability to repay rule. A few lenders that fall under specific exemptions in that rule can offer a no ratio loan on a primary home. Expect a larger down payment and a higher rate.

What "no ratio" and "stated income" mean today

Before 2008, many loans let borrowers state their income without proof. After the crash, the federal ability to repay rule required most lenders to verify income and debts before making a home loan. So the old stated income loan is mostly gone.

The rule has exemptions. One covers loans made by lenders designated as Community Development Financial Institutions. Because of exemptions like that, a small number of lenders can offer a no ratio loan on a home you live in. I work with lenders who offer it.

Who it fits

• Borrowers with strong credit and a large down payment whose income is hard to document.
• People whose income is real but does not fit any standard document, even bank statements.
• Buyers who need to move quickly and can bring more cash to closing.

The trade offs

• A larger down payment than most other loans.
• A higher rate than conventional and most non QM loans.
• Fewer lenders, so terms can change.

Before choosing a no ratio loan, I check whether a bank statement, 1099 or asset qualifier loan can work. Those usually cost less.

Buying a rental instead?

For investment property, the usual no income check loan is a DSCR loan. It qualifies the property on its rent instead of your income. See no ratio DSCR loans for that version.

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