No-Ratio Mortgage

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.