Using a No-Ratio Loan to buy a Primary Residence

[Brad Roche]

What is a no-ratio loan? Much like a DSCR loan for an investment property- a no ratio loan does not look at your Debt-to-income ratio (DTI). They are mainly focused on your credit score and cash reserves. This is a great loan option for non-traditional buyers who write off a lot of their income as a loss (i.e. Self-employed / Business Owners). As far as qualifying income when applying for a traditional mortgage- we can only use income that you pay taxes on.

Here are the requirements for our No-Ratio program- they may differ lender to lender but this can be used as a good base of knowledge to understand how a No-Ratio Loan works. Please talk to your lender about their No-Ratio requirements:

• Occupancy Types:
  • Primary Residence
  • Second Homes
• Eligible Property Types:
  • SFR, PUD, Townhouses, Condo's, Multi-Units, Modular, Rural, and Log Homes
• Credit Score Minimum/Cash Reserve Requirements/Down Payment Requirements
  • 720+ / 24 Months Cash Reserves (PITIA*) / 20% Down
  • 680-719 / 18 Months Cash Reserves (PITIA*) / 25% Down
  • 660-679 / 12 Months Cash Reserves (PITIA*) / 35% Down

* PITIA is your monthly mortgage payment (Principle, Interest, Property Taxes, Home Insurance, and Association Fees

If Comparing No-Ratio and Conventional- you would go for Conventional 10/10 times if you can qualify. For No-Ratio Loans- the terms are not ideal but are a great alternative option for non-traditional borrowers and those who can not qualify Fannie Mae/Freddie Mac Loans.