Low Doc Home Loans

You’re in the process of looking at your options regarding a home loan. You’ve heard the term “low doc home loans” a few times while doing your online research, but you’re still not sure what it means. You’ve also seen terms like ‘alt doc loans’ and ‘ lite doc’ mentioned too. It’s got you wondering what they are and how you could access one.

 

What are Low Doc Home Loans?

 

This type of home loan is a low documentation (hence the name “low doc”) loan that is designed for people who are unable to provide all of the normal paperwork required for a standard home loan application.

The type of people that might apply for a low doc home loan are self-employed people or investors who don’t have a regular job where they are being taxed on PAYG income.

A low doc loan offers a lot of flexibility in the lending solutions provided. If you’re a self-employed freelancer, consultant or contractor, then you might be the perfect candidate for accessing a low doc home loan.

This type of mortgage is well suited to borrowers who have a combination of assets and income, but aren’t able to provide normal paperwork such as payslips, tax returns or financial statements.

A low doc loan uses a self-verification process to confirm income details. Basically, you sign a declaration document stating what your earnings are and where they come from.

This means that if you’re just starting out as a freelancer or tradie, you don’t have to come up with lots of income statements, which is great, because you may struggle to provide them anyway!

 

What Documentation is Required?

 

While you don’t have to provide all the usual documentation like you would on a standard home loan, there are still some documents that a lender might ask for. These could include:

  • Self-verification via income declaration form
  • Recent business activity statements (BAS)
  • Your ABN and/or registered business name
  • Bank statements
  • GST registration details

If you’re not sure on any of these documentation requirements, chat to an ACF mortgage broker who can answer all your questions.

To help you get all of this paperwork together, you could also chat to a qualified account. Someone who is local to your business, understands what your business about, can help you to create the right paperwork in a way that highlights how strong you are as a candidate for a low doc home loan.

 

Case Study: Bob the Plumber

 

Bob has been running his own plumbing business for 5 years and he has his wife have been thinking about buying an investment property to add to their wealth creation plan. 

They’ve done some online research and think that a low doc home loan is a good option for them, so they put in a call to their bank, only to be told they aren’t eligible for any of the mortgage products they provide.

Devastated, they turn to a recommendation from a friend and call ACF to discuss their options. ACF confirms that they are eligible for a low documentation home loan and start the ball rolling.

Bob completes an income declaration form and his accountant provides his last two years’ worth of BAS. Within days Bob and his wife are pre-approved for a $350,000 mortgage and start shopping immediately!

 

Compare Low Doc Home Loans

 

What Are the Main Differences Between a Low Doc and Full Doc Home Loan?

 

The main differences between a low documentation home loan and a standard home loan application can include:

  • Lower LVR, which means you might only be able to borrow 80%, which means a higher deposit requirement
  • A higher interest rate might be charged, depending on the lender
  • No company financial reports or tax returns are required as they would be in a standard home loan application
  • Most lenders will accept a declaration of income in place of a payslip

 

One of the key things you should look at when considering this type of home loan, is understanding how much of a deposit you might need before starting the application process for a low doc home loan.

Using a mortgage calculator will allow you to work this out, which will also provide you with information on potential repayment amounts.

 

Top 5 Tips to Get Your Low Doc Home Loan Approved

 

#1: Find the right lender: Not all lenders are equal when it comes to low doc home loans, so if you’re self-employed and have a unique set of circumstances, finding the right lender will ensure that you don’t have any issues in the future. Use a good mortgage broker to help you with this.

#2: Understand what lenders look at: Lenders are looking at what your taxable income is, and the higher this figure, the better in relation to how much you can borrow. Chat to your accountant and have them prepare a special report for your low doc home loan. They don’t need to see your ‘paper losses’.

#3: Review your credit score: Make sure you know what your credit score is and be prepared to explain any recent credit history entries. Your credit score will play a large part in the approval process, so make sure it’s in good standing.

#4: Show savings: Make sure your savings records have a solid 3-month history of regular, consistent deposits.

#5: Be upfront: If you’re signing an income declaration and fudging with figures a little, you could find yourself in hot water come tax time. The reason for this is the ATO may choose to use this declaration as the basis for your tax return. Be honest in your disclosure to avoid any future issues arising.

 

Now that you understand what a low doc home loan is, who can access one and what documentation is required, you can take the next step in securing a home loan that suits your specific needs.

Chat to the team at Australian Credit and Finance and find the right low doc home loan and lender today.

Talk to our friendly team of Australian Credit and Finance mortgage experts who can help you navigate your way through the process of buying a home, investing in property or refinancing your home loan. Call us today on 1300 735 557 to discuss your low doc home loan options.
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