NINA Loans: What No-Income-No-Asset Mortgages Are and How They Work

The no-income-no-asset loan, or NINA loan, allows you to get a mortgage without providing any pay stubs, tax documents or bank statements to verify the source of your down payment funds.

Once a popular mortgage option in the years leading up to the Great Recession, the NINA loan had largely disappeared but is now making a comeback.

What is a NINA loan?

A NINA loan is a specialized type of mortgage that can be approved without the standard income and asset documentation paperwork required by traditional mortgage programs, such as conventional loans. That means you don’t need pay stubs, tax forms or bank statements for preapproval.

The NINA loan is considerably different from alternative lending programs that have popped up in recent years, such as bank statement loans, which allow lenders to use a 12- to 24-month average of cash deposits to prove income instead of tax returns.

How does a NINA loan work?

With a true NINA loan, you don’t even write down your monthly income on the loan application, and you can leave the asset section blank. However, you’ll need to meet very specific requirements to qualify for a NINA loan and also consider the risky features that accompany this loan type.

• You can only finance investment properties. Unless you’re financing a property to flip or building a portfolio of investment properties, you won’t qualify for a no-income-verification loan. In the aftermath of the housing bust in 2008, federal regulators eliminated NINA loans for owner-occupied homes.
• You may need a higher credit score to qualify. Current NINA loan programs require at least a 575 credit score. Some NINA lenders may require a higher score or charge you a higher rate for a lower score.
• You’ll need a bigger down payment. Expect to make at least a 20% down payment. If your credit score is lower than 600, you’ll need to put 30% down.
• You’ll qualify based only on the rental income. Although you don’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) mortgage payment.
• You’ll pay higher interest rates. No-income mortgage lenders charge higher mortgage rates than traditional loan programs. Additionally, many NINA lenders only offer adjustable-rate mortgages (ARMs). The lower your credit score, the higher your rate will be.
• You’ll have a prepayment penalty. A prepayment penalty is a fee you’re charged for paying off your loan too early. For example, a NINA lender with a three-year prepayment penalty will charge you a fee if you refinance or sell before your regularly scheduled 36th payment.

NINA vs. NINJA loans

A NINA loan is a type of NINJA loan. The acronym “NINJA” refers to “no income, no job, no assets” — in a NINJA loan, lenders issue a mortgage based mostly on the borrower’s credit score. This largely changed after the 2008 crisis.

History of NINA loans

Before the housing crisis, NINA loans were commonly used to buy or refinance owner-occupied homes. Originally intended for self-employed borrowers, loan officers abused these loans by offering them to borrowers without verifying they had the ability to repay the loans.

NINA loans gained popularity around the same time that stated-income home loans made their debut; both programs contributed to the housing crash. Government regulators passed new laws requiring lenders to verify that borrowers could afford to repay their loans and, until recently, borrowers couldn’t get NINA loans.

New mortgage rules for NINA loans

The new ability to repay rules are supposed to protect borrowers who are buying or refinancing a primary residence, second home or vacation home. However, regulators left some wiggle room in the guidelines for business-purpose loans.

Mortgages for investment properties fall under this exception, which gives lenders the discretion to decide qualifying guidelines. The biggest safeguard: Lenders must verify the property will generate enough monthly rental income to offset the mortgage payment.

Watch out for NINA loans and mortgage fraud

Be wary if you’re encouraged by a loan officer, real estate investment group or even a friend or relative to take out a NINA loan on the promise of getting paid a fee or a guaranteed return on your investment. This type of proposal is more than likely part of a mortgage fraud ring.

Also known as “straw buyer” schemes, this scam involves finding a buyer that meets the credit score requirements to apply for the NINA loan. Meanwhile, the funds for the purchase actually come from a source that intends to manage or own the property. If you think you’re being targeted, report it online to the FBI.

Alternatives to NINA loans

Traditional purchase loans always require income and asset documentation. However, there are some government-backed refinance programs with no-income-verification mortgage features built in. Here’s three of them:

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 rate without verifying your income or employment.

VA interest rate reduction refinance loan. Military borrowers who have a loan guaranteed by the U.S. Department of Veterans Affairs (VA) and have made on-time payments can refinance with no income or asset documentation using the interest rate reduction refinance loan (IRRRL) program.

USDA streamlined assist refinance. Rural homeowners with existing loans backed by the U.S. Department of Agriculture (USDA) can improve the terms of their loan through a USDA streamlined assist refinance, without facing a credit review or providing income paperwork.