What Is a NINJA Loan?

NINJA Loans Explained

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A NINJA loan is a “no income, no job, no assets” loan. NINJA loans are made when lenders do not independently verify that a borrower has the income and assets they claim. They were once common in the mortgage industry prior to the 2008 financial crisis, but regulations have made them more difficult to obtain.

It's important to understand what NINJA loans are, their downsides, and why they are less likely to be available today.

Definition and Examples of a NINJA Loan

Lenders generally require independent verification of a borrower's ability to repay a loan in the form of pay stubs, tax returns, and other financial documents.

No income, no job, no assets (NINJA) loans do not impose this typical requirement. With a NINJA loan, a lender asks the borrower what they earn and what assets they own, and does not verify their employment, income, or the existence of claimed assets.

Prior to the 2008 financial crisis, many mortgage lenders issued NINJA loans. They provided mortgages to people without confirming that they had sufficient income and assets to make their payments. Borrowers simply told lenders how much they earned and how much money they had in the bank, and no one checked to see if these statements were true.

Unfortunately, many borrowers who were given NINJA loans based on their stated income and assets ended up with loans they could not afford, which resulted in foreclosures.

  • Alternate names: Low or no doc loan; stated income, stated asset loans

How NINJA Loans Work

NINJA loans are risky loans because lenders are relying solely on a borrower's credit score and estimation of their income and the value of their assets.

For example, a borrower applying for a NINJA loan would simply state what their job is, how much money they earn, and how much money they have saved. The borrower would not provide documentation or proof. Lenders would then use these financial figures and the borrower’s credit score to determine whether the borrower qualifies for a loan, and how much money to lend them. Lenders would not independently confirm that the income and assets the borrower reported are correct.

If the borrower is not honest about their income or assets, the lender may approve a loan that they would not otherwise have been allowed because it is too risky. Most lenders have minimum income requirements before giving a loan. A borrower may appear to meet those based on their stated income, even if they actually don't meet them because their real income is lower.

For example, if a borrower were to state that they earned $100,000 a year and had $80,000 in savings for a 20% down payment, a lender might approve a NINJA loan of $320,000 so the borrower could buy a $400,000 home. But if the borrower doesn’t actually have that much in savings or make that salary, that mortgage might be really difficult to pay every month.

Pros and Cons of NINJA Loans

  • Quick loan approval

  • Very risky for lenders

  • Borrower likely to default if they take on a loan they can’t afford

  • Bad for the economy

NINJA loans can be made quickly by lenders because a borrower can simply state their income and assets, and the lender can base loan approval on this provided information. Lenders won't have to spend time reviewing tax returns or pay stubs, contacting employers, or reviewing bank statements.

Unfortunately, NINJA loans are risky for lenders because if borrowers aren't honest about income or assets, there's a substantial chance of default. NINJA loans can ultimately be bad for borrowers, who could end up in default if they are given a loan they can't afford. And NINJA loans can be bad for the economy. Too many of them were issued in the early 2000s and it contributed to the 2007-2008 financial crisis.

Lying about income or assets on a loan application is considered a form of financial fraud, even if the lender does not independently verify the provided information.

Alternatives to NINJA Loans

NINJA loans are no longer common because of new regulations including the Ability to Repay rule. This rule requires lenders to independently verify income and assets to ensure that borrowers have the money to pay back loans.

Lenders who comply with income and asset verification requirements can issue “qualified mortgages," which are loans that meet specific government criteria and do not include provisions that are harmful to borrowers.

Another alternative for homebuyers is an FHA loan, which requires less money for a down payment. You can also look into conventional mortgages. If you're not sure how much you'll be able to borrow, mortgage preapproval is a smart first step.

Key Takeaways

  • NINJA loans are “no income, no job, no asset” loans. They may also be called "no doc" loans or "stated income, stated asset" loans.
  • NINJA loans are issued by lenders who do not verify income or assets.
  • They are risky loans that are no longer common thanks to new regulations after the 2007-2008 mortgage and financial crisis.