NINA Loans: What No-Income-No-Asset Mortgages Are and How They Work
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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 where your down payment cash is coming from.
Once a popular mortgage option in the years leading up to the Great Recession, the NINA loan had largely disappeared. It’s now making a comeback.
What is a NINA loan?
A NINA loan is a specialized type of mortgage that can be approved without 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 that allow lenders to use a 12- to 24-month average of cash deposits as proof of 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, there are very specific requirements for who can qualify for a NINA loan, as well as risky features to consider.
- You can buy only investment properties. Unless you’re financing a property to flip or you’re 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’ll 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 lower scores.
You’ll need a bigger down payment. Expect to make at least a 20% down payment or more. However, if your credit score is lower than 600, you’ll need to put 30% down.
- You qualify only on the rental income of the home you’re buying. 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 interest rates than traditional loan programs. Many NINA lenders offer adjustable-rate mortgages (ARM) only. The lower your credit score, the higher your rate will be.
- You’ll have a prepayment penalty. A prepayment penalty is a charge for paying off your loan before a set time. For example, a NINA lender requiring a three-year prepayment penalty will charge you a fee if you sell or refinance before your 36th payment.
History of NINA loans
Before the housing crisis, NINA loans were commonly offered for buying or refinancing residential 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 a NINA loan.
New mortgage rules for NINA loans
The new ability to repay rules are supposed to protect homeowners buying or refinancing a primary residence or second/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 family member 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, contact the FBI at 202-324-3000, or file a complaint online.
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 a list of three of them:
FHA streamline refinance. If you currently have a loan insured by the Federal Housing Administration (FHA), reduce your rate without verifying your income or employment with an FHA streamline refinance.
VA interest rate reduction refinance loan (IRRRL). Military borrowers who have paid a loan guaranteed by the U.S. Department of Veterans Affairs (VA) on time 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 with a USDA streamlined assist refinance without a credit review or providing income paperwork.