What Is a NINA Loan Program?

A No Income No Asset (NINA) loan program allows an applicant to receive a mortgage with little or no documentation of financial ability to repay the loan. Typically, a lender will extend a mortgage only when the applicant can show income to repay the debt and assets to rely on should an emergency occur. With a NINA loan, only employment is verified. This can create a dangerous loan situation for both the borrower and the lender. 

Risks Posed to Borrower

A borrower engaging in a high-risk, no-doc loan faces two potential risks. First, there is the risk of taking on high interest rates and financing costs. This is a reality any time a borrower engages in a high-risk loan, and it can ultimately increase the cost of a mortgage substantially. The second, and perhaps greater, risk is that the borrower will take a loan he or she cannot reasonably afford. Without a mortgage company reviewing items such as wage and assets, the lender may offer a very high loan to an individual who would otherwise qualify for much lower limits. The borrower must be knowledgeable and disciplined enough to know if he or she can take this large loan. In many cases, it is unwise to do so.

Risks Posed to Lender

A lender extending a no-doc loan is essentially making the loan based on good faith. The lender may consider items such as the borrower's previous mortgage or rental history to estimate whether that borrower can repay the mortgage. However, there is no guaranty the borrower is representing his or her income appropriately. A no-doc loan will not qualify for many federal and private mortgage insurance programs, which further exposes the lender to a tremendous amount of risk. Lenders will take on this much risk only if the corresponding financial reward is equally substantial. 

Benefits of a NINA Loan

NINA loans arose, like most loan programs, to meet a specific need of a group of people. The group that benefits from this particular program is the population that cannot verify a stable income. Artists, musicians, independent contractors, salespeople and those who rely on tips and bonuses often have difficulty verifying income. While they may earn a high amount of money each year, much of this money may arrive in sporadic one-time payments. Lenders will not accept this sporadic income as verifiable, and these individuals may be rejected for traditional mortgages. 

NINA Loan Alternatives

If you have difficulty verifying your income, consider alternatives to a NINA loan to save money and still secure a mortgage. One option is to wait until you have at least three years of consistent income on your tax returns. Many lenders will accept this as proof of income despite an irregular paycheck. If you can supply a high down payment of at least 20 percent on a mortgage, you may qualify for a conventional loan without private mortgage insurance. You may have to wait several years for either of these options to become a reality, but the wait can save you tens of thousands of dollars over time.