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A No-Ratio mortgage is a type of mortgage that does not require verification of your income. The mortgage lender will make their loan decision based on your credit rating and the loan-to-value of the property. If your income is difficult to prove, a No-Ratio mortgage is a viable alternative to a conventional mortgage loan.
Benefits of a No-Ratio Mortgage
Most mortgage lenders compare your monthly debt payments to your income to arrive at what is called your debt-to-income ratio. A No-Ratio mortgage loan does not take into account your income. Instead, it is concerned with your credit and the property. This type of loan can close quicker because it involves less documentation.
A No-Ratio loan can also be used if your debt-to-income ratio is higher than a lender allows. Ask your lender what their loan terms are for a No-Ratio loan, and what they require in order for you to qualify. If you are eligible and the loan structure is agreeable, you may want to consider this type of loan for your home purchase.
One of the biggest drawbacks of these loans are the fees and rates that are offered with this type of program. The rates can be as much as 2 to 4 times than conventional loan.
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