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What Is A High Ratio Mortgage Loan?

By Bob Redtree

What is a high ratio mortgage loan? Who can qualify for a high ratio mortgage loan? Are high ratio mortgage loans still available in this market?

A high ratio mortgage loan is a type of mortgage where over 75% of the value of the home is financed. This type of financing became very popular in 2002 when the government encouraged lenders to establish a program to allow lower income families to get a mortgage. This type of mortgage must carry mortgage insurance. Borrowers that have less than 25% to put down on a home will often pay higher finance rates and have longer term mortgages than a standard mortgage.

Who can qualify for a high ratio mortgage loan?

High ratio mortgage loans have the same qualifications that a regular mortgage does in terms of credit rating. The difference is the amount required for a down payment. Also, borrowers who use a high ratio mortgage loan to purchase their home will be required to carry mortgage insurance on the loan.

Are high ratio mortgage loans still available on the market?

The current housing crisis has made the availability of a high ratio mortgage loan harder to obtain. These types of mortgages are still available on the market, but fewer companies offer them to the public. Many lenders blame this type of mortgage on the current crisis that haunts the housing market today. Foreclosure rates on high ratio mortgages are very high in comparison to standard mortgages. This does not mean that a person can no longer qualify for this type of loan. This does mean that a borrower will have fewer options when trying to find this type of financing. Borrowers may also find that this type of loan will carry a higher interest rate and higher finance charges than a standard mortgage.

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4. Why Are Jumbo Mortgage Rates So High?
5. Can I Get A Mortgage Loan With No Down Payment?