Our client was under contract to purchase a new home for $2.4 million in southwest Florida. He and his wife found their dream home in Lakewood Ranch, a nationally recognized master-planned community known for its luxury neighborhoods, golf courses, and resort-style amenities.
As a seasoned CPA with decades of experience implementing tax-efficient strategies for his clients, his own personal and business tax returns reflected the same disciplined approach. However, the low adjusted gross income on his returns made approval under traditional mortgage guidelines not feasible.
His reported income (mainly dividend distributions and Social Security) was not enough on paper to cover all the carrying costs of his multiple real estate holdings, let alone the proposed carrying costs on the new Lakewood Ranch home.
Further adding to his carrying costs, he did not want to sell his current primary residence in Florida until after he closed on this new purchase.
In short, his debt-to-income ratio (DTI) was too high to qualify for a traditional mortgage.
Because our client could not document sufficient income, he was the perfect candidate for a no-ratio jumbo loan, which is a special kind of non-QM loan that eliminates income and verification entirely.
Under the no-ratio program, the lender does not calculate the applicant’s debt-to-income ratio (hence why it’s called “no-ratio”).
Instead, the focus shifts to 3 main criteria, and our client checked all the boxes.
First, no-ratio mortgages often require a relatively large down payment of at least 20%. Our borrower was conservative and elected to put down a substantial down payment of 46.67%.
Second, no-ratio lenders require a minimum credit score of 660 or 680. Our client had a solid credit profile with a 780 score and no derogatory items.
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 PITIA payments (principal + interest + taxes + insurance + association fees). Our client had substantial liquid assets in brokerage and retirement accounts, showing he had at least 12 months of reserves.
The underwriting process went smoothly. As no DTI calculations were required, we did not have to provide tax returns or any other income documentation.
Although our client was approved up to 80% LTV, he opted for only 53.33% LTV after performing a cost-benefit analysis. With a lower LTV, he qualified for a lower interest rate and reduced his reserve requirements while still preserving $1.28 million in liquidity.
For the 46.67% down payment and closing costs, he planned to use his maturing Certificates of Deposit accounts, and we coordinated the paper trail to source those funds.
Our client closed on time, and he and his wife are enjoying their new home and lifestyle in the Lakewood Ranch community.
Because the loan has no prepayment penalty, they have the flexibility to pay off the loan whenever they choose to list and sell their old, departing residence.
This case study shows how no-ratio lending offers a path to approval for CPAs, business owners, and other professionals who strategically optimize their tax reporting.
DAK Mortgage is a licensed mortgage broker that can navigate you through the process of finding the right loan for your needs.
