Hi Simplyfying,

They probably mean "no ratio" loans... and yes, they ignore income for purposes of qualification (basing terms much more heavily on the great credit history of the borrower.)

No Ratio loans do require verification of employment, however, so if your buyers just lost their employment, then this won't be the loan for them.

They'll probably end up using a NIVANE (said "KneeVahNay") loan program... No Income, Verified Asets, No Employment. Sometimes also called "No Doc" by the confused public (but there really is no such thing as an absolutely pure "No Doc" loan. There is always SOME form of verification.)

If their credit history is indeed strong enough to stand on its own, they should have little trouble.

Luck!
Dave Donhoff
Strategic Equity & Mortgage Planner

If I was presented with such financing, I would refuse the offer. No questions asked. There's too much room for the deal to go south. For me, solid financing is the most important part of the offer. The fact the guy doesn't have a job would fuel my distaste for this type of arrangement when buying a home I have for sale.

Thank you Dave for your knowledgable answer. So people can actually get a loan like this with little difficulty if they have sterling credit? That baffles me. I suppose they would have to pay a much higher interest rate? What other incentive would the lender have? Very interesting to me. And Sparksals, I know what you mean. I would hate to be in a situation where the offer all falls apart at the last minute because of financing. I did ask for a letter of pre-approval from their lender and earnest money. I guess we'll wait and see what happens. What an adventure:)

Well I would be hesitant if they do not have money for the downpayment. Since even in the example Dave gave they have to have some verified assets most likely consistent with his prior earnings and anticipated future earnings

Sparksals, there is nothing to be distasteful about, it is just business. If you do not feel comfortable because it may crater the deal at the last minute that is fine. Personally, as long as they had the downpayment, while I would not be thrilled, in this market I would at least consider it

To answer your question, the rate is not that MUCH higher than a regular loan. The quotes in the paper I have seen are for .5% or less. The bank is getting a little more interest. Plus if this person has been a homeowner for 10 years and has a credit history going back 20 years, and has a FICO of 750, odds are he will not default. Personally the fact that he has lost job would make me wonder a little. This is different than someone in an all cash business who simply cannot prove his income. Here something new has happened to this person and not in a good way, who knows if he will be able to find another job

However, that is the Banks problem and as long as the commitment does not require him to get a job before closing I think I may be ok with it but the OP really knows the situation and has to go with his gut

This maybe an offer, but I think I would have to advice my clients to walk away from it. They are a one-income family and the bread winner is without a job, and they have no equity in their current home? Are they using an agent? How will they pay the commission with no equity? How will they ever pay for a new mortgage?

In answer to rrah's posting- it is my understanding that the improvements they have made to their current home will cause them to just "break even" when they sell. So, I guess I should say they have no profit in their current home. They aren't using an agent, it's a fsbo. They think they have a job lined up. I too, have lots of questions about all this. I guess if they make us a solid offer with a letter of pre-approval from their lender, we will take a hard look at it. In a perfect world we would get a buyer with great credit and no home to sell first, telling us to take all the time we need to move out. Ahhhh, I can dream, can't I?