The Solution for Challenged Self Employed Applicants
Low documentation loans, better known as low doc home loans are a great way for self-employed people to get themselves on the property ladder. These flexible plans work well for people who do not have set incomes (property investors, contractors). Since many mainstream lenders make it difficult with these sort of applications, a gap in the market was created, and the low doc home loan filled the void.
Those who are unable to provide proper documentation of their income (financial statements, tax returns) are generally directed toward low doc home loans. Somebody might apply for one for these reasons:
- They are self-employed and pay themselves a basic income to avoid higher tax brackets
- They have an income which varies on a regular basis
- They don’t work regular hours (seasonal jobs)
However, it must be noted that if a self-employed person is applying for a low doc home loan, they must have an ABN and proof that they have been in the business for a minimum of two years (some exceptions will apply).
It can be extremely difficult for people to get loans as lenders typically have very strict conditions. Hence, low doc home loans are ideal as much less paperwork is required. To help unravel some of the mysteries of getting a low doc loan we highly recommend retaining the services of an expert mortgage broker.
The Importance of Documents
There are a number of lenders now offering low doc home loans and the competition has helped to offer potential home owners great deals. CBA, ANZ and Westpac are three lenders that Australians citizens can turn to. Despite not having full proof of income, the opportunity is still there for potential home owners to get their dream home.
Why are Low Doc Home Loans Required?
Those who want a low doc home loan are likely to have a good income, but because it may not come in the form of a regular salary, lenders are cautious about accepting their applications. Obviously, a lender needs to be sure that their client will be able to make their mortgage repayments, so the low doc home loans were specifically set up to tailor to people in this situation.
Is it Difficult to Get a Low Doc Home Loan?
It can be quite easy to get a low doc home loan, and thanks to the lack of paperwork, it’s generally a speedy process, not unlike applying for quick cash loans. However, as with any loan, you would do well to acquire the services of a mortgage broker who can point you in the right direction, and explain everything you would want to know about a low doc home loan.
Income Verification Process
So, how do you go about getting a low doc home loan? Firstly, you must state your income on a declaration document. The credit provider will then be able to get a good gauge of your income by looking at your BAS statements, or by asking for an Accountants letter. In some cases, they may also request to see your bank transactions from the past year.
Depending on your lender, your low doc home loan will be either relaxed or strict. The stricter lenders are likely cautious of the current financial climate and are protecting themselves. However, a relaxed lender may allow your borrowing serviceability income to be anywhere in the region of 40% of your turnover.
Here are some of the conditions that a stricter lender may enforce:
- A lenders mortgage insurance (LMI) premium will be imposed if your low doc home loan’s loan-to-value ratio (LVR) is more than 60%
- Your borrowing cannot exceed 80% of the security property’s value
- Factors which determine interest rates set by creditor:
Credit history of the client
Get Professional Advice
A home loan expert will be able to help you get the best low doc home loan for you. It’s best to look for help from a trained professional, as a home loan broker will be able to answer any queries you have and work out the best deal for you. Why have the hassle of doing it yourself when you can have a finance broker do it for you.
Such loans can be complicated, and you want it explained in a way that you can understand. You don’t want to get caught out so, before you jump in, make sure you seek the advice of a high-quality mortgage broker.