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!