What is a low doc home loan? First of all, it’s proper name is low documentation or low documentation. It’s the type of mortgage that can be secured with different paperwork versus a full documentation loan.
While there may be plenty of people who benefit from this type of home loan, it’s particularly useful if you are self-employed. This might be the alternative loan option for you if you don’t have the traditional documents that lenders request, which is why it may benefit self-employed individuals. Typically, the self-employed find it more difficult to provide proof of income with standard documents. That doesn’t mean self-employed people should be kept from climbing the housing ladder.
The Low Down
Previously, low doc loans were exactly that, a mortgage you could take out with fewer documents. Once the global financial crisis struck, however, the lending rules tightened changing everything. It was no longer acceptable to lend to people with low documentation.
After the crisis, the National Consumer Credit Regulations were introduced in 2009, providing a challenge to how low doc loans operate. The biggest piece of the puzzle is that lenders can’t lend unless they meet the lender’s responsible lending obligations.
What does that mean today when it’s in action?
It means that every loan must pass the test showing the borrower can manage loan repayments. Due to these rule changes, the low doc loan became similar to a traditional full doc loan. The biggest difference isn’t the number of documents, but the type of documentation that can be used to satisfy the rules. Thus it’s new name the low doc loan! You will still have to produce a wealth of documentation, but a lender can be more flexible in what type of documentation they accept from potential borrowers.
For example, if you are dealing with a non-bank lender like Seek Mortgages and you are unable to produce up-to-date tax returns, there are other documents you can use to support your application. Non-bank lenders will look at your business activity statements, bank account statements, whether you’re business has been GST or ABN registered for 6 months at the least, and an accountant’s letter.
Of course, there are a variety of different products to peruse when considering a home loan and each of these will require different supporting documentation. This is why it’s important that you reach out and speak to the professionals who will guide you to the right home loan for you, whether you’re self-employed or otherwise. Contact us if you would like advice or just to learn more about what type of products may be suitable for you. We are happy to walk you through the documents you have, talk about what documents you might need, or which loan is more appropriate for your needs and available documentation.
If you want more information about low doc home loans, then get in touch with us today and allow us to find you a lender that will help you even if the major banks have said no.