In the "normal world," when people want to buy a house, lenders look at their debt-to-income ratio to figure out how much of a home loan they can afford. But we don’t like living in the normal world, so now that it’s time for us to buy our next house, we’re looking into no-ratio mortgages.
A “no-ratio mortgage” is one where the debt-to-income ratio thing is not a part of determining our loan amount. Instead, the lender looks at our assets, our credit score, and the size of our down payment.
We’ll end up paying a higher interest rate with this type of loan than we would with a “normal” one (borrowers who don’t claim income on loan applications are historically more likely to default), but we get to keep our debt-to-income ratio to ourselves. This is great for folks who either can’t or don’t want to verify their income, but we should be aware of those high interest rates before we take on a no-ratio mortgage of our own.
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Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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