NINA Loans: What No-Income-No-Asset Loans Are and How They Work
No-income-no-asset (NINA) loans require less documentation than a typical mortgage loan. They allow for loan approval without the mortgage lender first verifying your income or assets. But, as you might imagine, NINA loans come with a fair amount of risk — and they’re often cited as a major contributing factor to the 2007-08 financial crisis.
While these loans are no longer available in the same form they were before the housing crisis, they’re still around today as investment property loans. Here’s what you need to know when deciding whether a NINA loan is right for you.
Key takeaways
- A NINA (no-income-no-asset) loan allows a lender to approve you for a mortgage without verifying your financials first.
- These loans are riskier than traditional mortgage loans and typically come with higher interest rates.
- While NINA loans are no longer available to most homebuyers, they still exist as investment property loans.
What is a NINA loan?
With a no-income-no-asset (NINA) loan, borrowers can get mortgage approval without providing the standard income and asset documentation that traditional mortgage programs require.
With this type of loan, you won’t need to give your lender pay stubs, tax forms or bank statements. However, the lender will verify your employment status before finalizing the loan.
Today’s NINA loans are only available to real estate investors. If you’re buying a primary residence, you’ll probably be asked to use another type of alternative lending program. In that case, bank statement loans are more common. They allow lenders to use a 12- to 24-month average of cash deposits into your bank accounts — instead of tax returns — to prove your income.
Callout box with exclamation point icom
NINA vs. NINJA loans
A NINA loan is similar to a NINJA loan. However, NINJA loans require even less verification. The acronym “NINJA” refers to “no income, no job, no assets” — in a NINJA loan, lenders issue a mortgage based mainly on the borrower’s credit score.NINJA loans no longer exist, as they don’t comply with consumer safety laws.
How NINA loans work
Federal “ability-to-repay” rules require lenders to document that a borrower has sufficient income, assets and employment to afford a mortgage. However, these rules only cover borrowers who are financing a primary residence, second home or vacation home.
Mortgages for investment properties fall under an exception, which gives lenders the ability to waive standard guidelines, as long as they verify the property will generate enough monthly rental income to offset the mortgage payment.
To offset the risk of approving a borrower without the usual documentation, NINA mortgage lenders charge higher mortgage rates than traditional loan programs.
How to qualify for a NINA loan
NINA loan lenders usually require:
- A higher credit score. Most NINA lenders require a higher credit score than usual. In some cases, they may require a minimum score as high as 700.
- A bigger down payment. Expect to make at least a 20% down payment. But if your credit score is on the lower end, you may need to put down 30%.
- Sufficient rental income. Although you won’t need to prove any personal income, the potential rent on the home you’re buying must be high enough to at least cover your new PITI (principal, interest, taxes and insurance) payment.
Risks of NINA loans
Default and foreclosure
The biggest risk that comes along with a NINA loan is that you’ll take on a mortgage you can’t afford. During the 2007-08 financial crisis, predatory lenders used these loans to approve mortgage applications for borrowers who wouldn’t otherwise qualify. Many borrowers couldn’t afford their homes, and they ended up defaulting on their mortgages and losing their homes to foreclosure as a result.
Mortgage fraud
NINA loans are also commonly used in mortgage fraud schemes. With that in mind, be wary of anyone who encourages you to take out a NINA loan and promises to pay you in return for your investment.
Also known as “straw buyer” schemes, these scams involve finding a buyer who meets the credit score requirements to apply for the NINA loan. Meanwhile, another party — one who’s unable to financially qualify for the loan — intends to manage or own the property.
It’s illegal to deceive a lender by using your name to purchase a home for someone else. If you think you’re being targeted, report it to the FBI.
Alternatives to NINA loans
There are several government refinance programs that can help you refinance without documenting your income.
FHA streamline refinance
If you currently have a loan insured by the Federal Housing Administration (FHA), an FHA streamline refinance allows you to reduce your mortgage rate without verifying your income or employment.
VA interest rate reduction refinance loan
If you’re a military borrower with a loan guaranteed by the U.S. Department of Veterans Affairs (VA) who’s made on-time payments, you can refinance with no income or asset documentation using the VA interest rate reduction refinance loan (IRRRL) program.
USDA streamlined assist refinance
Rural homeowners with existing USDA loans backed by the U.S. Department of Agriculture (USDA) can improve their loan terms through a USDA streamlined assist refinance, without facing a credit review or providing income paperwork.