Our client was under contract to purchase a new home for $1.9 million in Sarasota, Florida. A self-employed multifamily developer, he wanted to relocate his family from Maryland to sunny Florida.
He initially applied for a jumbo mortgage loan with a large online lender. However, the lender denied him because his debt-to-income ratio (DTI) was too high based on the low adjusted gross income (AGI) on his tax returns. Unfortunately, by then, the 30-day loan contingency in the purchase agreement had expired, and his $150,000 earnest money deposit was at risk. That’s when he reached out to us.
We reviewed his personal and business tax returns, bank statements and profit-and-loss statements.
In short, although he verbally told us his annual income was approximately $500,000, he could not show sufficient income on paper, either through tax returns or through alternative documentation:
Because our client could not document sufficient income, he was an ideal candidate for a no-ratio jumbo loan.
A no-ratio loan is a mortgage that does not require any calculation of the borrower’s debt-to-income ratio (hence why it’s called “no-ratio”). Quite simply, there is no verification of employment or income required, and DTI is not calculated at all.
Instead, the focus shifts to 3 other factors, all of which our client was well-suited for.
First, no-ratio mortgages often require a relatively large down payment of at least 20%. Our borrower was willing to put down 25% to demonstrate his commitment and financial capability.
Second, no-ratio lenders require a minimum credit score of 660 or 680. Our client’s credit score was in the mid-700s. Although his credit report showed a collections account from a building materials company, he provided documentation that the account had been paid off in full.
Third, as a tradeoff for not having to document income, no-ratio lenders require enough post-closing reserves to make at least 6 to 12 months of mortgage payments. Our client provided asset statements showing he had at least 12 months of reserves.
Because there was no income verification, no employment verification, and no DTI calculation, the underwriting process was streamlined.
We successfully transferred the existing appraisal report from the lender that had previously denied him. The appraisal transfer saved time and costs, and eliminated the risk of a lower valuation, as the appraisal report valued the property at the contract price of $1.9 million.
Although the no-ratio lender approved him at 80% LTV, our client elected to close at 75% LTV to secure better pricing and lower reserve requirements, saving thousands over the life of the loan.
With the down payment at 25% instead of 20%, we needed to document an additional $225,000 capital distribution that the borrower received just days before closing. The funds represented a verified return on the borrower’s equity investment in a related entity, and we fully paper-trailed the transaction to satisfy the lender’s asset-sourcing requirements.
The end result was he closed right on time, and he and his family successfully relocated to Florida.
This transaction highlights how properly structured no-ratio financing can preserve a purchase when traditional income documentation fails — allowing strong, asset-rich borrowers to move forward despite aggressive tax optimization and prior lender denials.
DAK Mortgage is a licensed mortgage broker that can navigate you through the process of finding the right loan for your needs.
