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.