Low Doc Home Loans
A Low Doc home loan, otherwise known as a non-conforming home loan, a lite-doc loan, or even an alt-doc loan is a unique lending solution for self-employed borrowers. If you’ve been saving up for your dream home, and you’re struggling to find the right home loan solution as a freelancer or contractor, then a Low Doc home loan might be the ideal solution for you.
Essentially, a Low Doc home loan works by allowing you to bypass the need to prove your income via pay slips and other traditional documentation. You’ll still need to submit additional documents to support your application, such as:
- Interim financial statements
- Old tax returns
- Previous bank statements
- 12 months of business activity statements
- Registered company name and ABN (Australian Business Number)
- Signed borrower’s income declaration
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What to Expect from a Low Doc Home Loan?
The policies on Low Doc home loans can vary from one vendor to the next, so it’s important to check through the terms and conditions carefully before you sign up for anything. Typically, most lenders will look for some of the following attributes in your application when determining whether to approve your Low Doc loan:
- Maximum LWR – If you can pay over the 20% common deposit rate, you’ll be more likely to gain acceptance for your loan.
- ABN registration – This will show lenders how long you’ve been self-employed. It should help to indicate that you’re not too much of a risk investment.
- Interest rate – Paying a slightly higher interest rate may be necessary to compensate lenders for the fact that you don’t have a typical income.
- Credit history – Most lenders will look at your credit file and history of debt repayment to see how frugal you are with your money.
- Net asset position – your overall position in relation to assets and gross income is often important.
Your lender might also require proof of how you plan to use your home loan cash if the money is released to you.
What Loan Features are Available with Low Doc Loans?
Low Doc home loans often come with all the same features you might expect from a typical loan, including interest-only options, fixed rates, split-loan options, and more. You can even access 100% offset accounts, and the opportunity to make extra repayments when you have additional income. However, you might not be able to access things like repayment holidays, third-party guarantees and introductory interest rates.
To gain approval for your Low Doc home loan, you’ll need to find out what kind of documents you can offer to a lender, what your needs are, and what lenders you qualify with. From there, you can choose the lender with the lowest possible interest rates, along with any additional features you need.
It’s possible to refinance a Low Doc home loan, although you’ll need to reapply for a home loan. Just because you were approved a few years ago, doesn’t necessarily mean that you’ll be automatically approved again. Additionally, it’s worth noting that many Low Doc loans also allow you to move to a Full Doc home loan after a specific period, providing that you have made the right repayments.