Understanding Low-Doc Home Loans and How to Get One

  • Posted 19 Feb

Understanding Low-Doc Home Loans and How to Get One

You’ve decided to take the plunge and buy a new home. You’re excited, but you’re also a little confused by all the jargon associated with buying a new home.

You’re not sure what type of home loan you should get, but you’ve been doing some reading and you’ve heard about these “low-doc” home loans.

As a self-employed person, you’ve heard that this is your best option, but you don’t really understand how it all works.

That’s what we’re here to help with. The following information will provide you with full details about what a low-doc home loan is and how you can get one.



What is a Low-Doc Home Loan?


A low documentation (low-doc) home loan is a type of mortgage that doesn’t require all the full documentation that a ‘normal’ loan requires.

They are specifically for borrowers who may find it hard to provide the usual proof of income the most people have access to.

Typically, this means self-employed borrowers.

Low-doc loans have changed significantly over the past few years, mainly in reaction to the global financial crisis.

With the introduction of the National consumer credit regulations in 2009, changes to low-doc loans meant that what was once truly a ‘low-doc’ loan, saw major changes in how these loans operate.

Now, a borrower needs to meet a lender’s responsible lending obligations, which requires every loan (no matter what type of loan it is) to pass a ‘not suitable’ test. This ensures that a borrower is able to meet their loan repayments and continue to manage them long-term.

The main difference between a current low-doc home loan and a standard home loan is largely in the type of documentation required to prove a borrower’s income.

At Australian Credit and Finance, we no longer refer to this type of loan as a low-doc loan, we call it a Self Employed Home Loan. This is to avoid any confusion, as low-doc loans are no longer truly low documentation anymore.



How Can I Get a Self Employed Home Loan?


Depending on your lender, you will need to be assessed just as thoroughly as a standard home loan applicant would be.

To be considered for a Self Employed Home Loan, you will be required to provide proof of income. This is where the difference between a standard home loan and self-employed home loan comes in.

The evidence required to prove your income as a self-employed person, is quite different to someone who is employed by a company.

You might be asked to provide any of the following documents to prove your income:

  • Evidence of your ABN registration (12-24 months, depending on loan amount)
  • Evidence of your GST registration (depending loan)
  • A signed declaration of your current financial position
  • Business bank statements (3-6 months)
  • Business activity statements (3-6 months)
  • A letter from your accountant

Without this type of home loan, it can often be difficult for self-employed people to be able to access a standard home loan, so it’s an important option that quality lenders should be providing.

If you’re interested in finding out more about Australian Credit and Finance’s Self Employed Home Loan, give us a call today to discuss your options.

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