What is a low doc home loan?
A low doc home loan, also known as a low documentation loan, is a type of loan designed for individuals who are self-employed or have non-traditional sources of income. This type of loan is ideal for those who may struggle to provide the traditional financial documents required for a standard home loan application.
Unlike traditional home loans that typically require extensive financial statements, tax returns, and proof of income, low doc home loans have more flexible documentation requirements.
What do i need for low doc home loan?
To apply for a low doc home loan, borrowers will need to provide a range of alternative documents to demonstrate their ability to repay the loan. These documents include business bank statements, business activity statements, or accountants letter.
Who can I apply for a low doc loan?
Borrowers who can apply for a low doc loan is self-employed individuals. Entrepreneurs, freelancers, and small business owners often have non-traditional income sources.
Types of Low doc loans
When it comes to low doc loans, there are several options available to suit different borrower needs. Some of the common types of low doc loans:
- Low Doc Home Loans
- Low Doc Construction Loans
- Low Doc Home Loans with BAS
- Low Doc Home Loans with Accountants Letter
- Low Doc Home Loans with Bank Statement
- Low Doc Refinance
- Low Doc Home Loan with Bad Credit
What documents do I require?
Although the requirements may vary from lender to lender, here are some common documents that you may need when applying for a low doc home loan:
1. Income Declaration Form: For alt-doc loans, you may be required to complete an income declaration form provided by the lender.
2. BAS/Business Bank Statements/Accountants Letter: Non conforming lenders either 6 months BAS, 3 – 6 months of business bank statements or Accountants letter can help establish your income stability and capacity to repay the loan.
4. Assets and Liability: You will provide proof of any assets you have, such as property, investments, or other valuable assets along with the liabilities.
5. Proof of Identity: As with any loan application, lenders will require proof of your identity. This can be in the form of a valid driver’s license, passport, or other government-issued identification.
How much deposit will I need?
Most Low doc lenders require a deposit of at least 20% of the property’s value but we have a few lenders offer low doc loan with 10% deposit.
Can I get a low doc mortgage with bad credit?
Yes, you can get low doc home loan even if you have
- Defaults, judgements, writs and summons
- mortgage or non mortgage arrears
- Current or discharged bankrupt.
Can I refinance with a low doc?
Yes you can refinance from a standard home loan or low doc loc to a low doc home loan. You will require 6 months loan statement, clear credit report ( or can qualify for specialised low doc loans) along with ID, Asset & liability statement, Self income declaration and one of these BAS, Bank statement or accountants letter.
Can I convert to a full doc loan later?
Yes, it is possible to convert a low doc loan to a full doc loan later on. Converting to a full doc loan can provide you with more favorable terms and potentially lower interest rates. However, there are a few factors to consider before making the decision to convert.
Firstly, it’s important to note that not all lenders may offer the option to convert a low doc loan to a full doc loan. Some lenders may have specific policies or restrictions in place regarding loan conversions. Therefore, it’s crucial to check with your lender beforehand to understand their policies and requirements.
One of the main considerations when converting to a full doc loan is the documentation required. Full doc loans typically have stricter documentation requirements compared to low doc loans. Lenders will require proof of income, employment verification, and other financial documents to assess your financial situation and ability to repay the loan. It’s important to ensure that you can provide all the necessary documentation to meet the lender’s requirements.
Are alt-doc and low-doc home loans the same?
Alt-doc, short for alternative documentation, and low-doc loans are both designed to assist self-employed borrowers who cannot provide the extensive financial documentation required by traditional lenders.
What’s the difference between a ‘low doc’ and ‘no doc’ loan?
Alt-doc loans or low-doc loans are designed for self employed borrowers who cannot provide extensive financial documentation. However, there is another loan category that caters to borrowers with minimal documentation requirements – ‘no doc’ loans.
The primary difference between low-doc and no-doc loans lies in the documentation requirements. Low-doc loans typically require borrowers to provide a limited amount of income documentation, such as bank statements or business activity statements or accountants letter, to demonstrate their ability to repay the loan. On the other hand, no-doc loans require no documentation at all, meaning borrowers don’t need to provide any proof of income or financial statements just self declaration.
How do I apply for a low doc loan?
One way to apply for home loan is directly with lender that offers low doc loan but do not recommend it. Using a low doc mortgage broker to lodge the application is the recommended way.
As mortgage broker are the experts and have better knowledge of lenders and their product offerings, so it’s crucial to go thorough a broker who knows which the right lender for you.
Do I need clear credit history?
When it comes to applying for a low doc home loan, having a clear credit history help you get loan approved at better interest rate.
There a second tier lenders that offer low doc loan for self employed borrowers with Defaults, judgements, writs and summons, mortgage or non mortgage arrears and even Current or discharged bankrupt.
What income verification do I need to provide?
Most low doc banks will ask the borrower to provide self income declaration form and one or combination of BAS, business bank statement or accountant letter.
What is a Risk Fee?
A risk fee, also known as a risk premium, is a charge that lenders may impose on borrowers to compensate for the potential risks associated with their loan. This fee is in addition to the interest rate charged on the loan and is typically calculated as a percentage of the loan amount.
What are the downsides of an alt-doc home loan?
The main downsides of alt-doc home loans is that they often come with higher interest rates compared to traditional home loans, Risk fee charged the lender and higher deposit.
Can I get a low doc loan for an investment property?
Yes, you can get a low doc loan for an investment property.
Are there any low doc lenders that offer construction loans?
Yes, there are low doc lenders that offer construction loans. While the majority of low doc loans are geared towards purchasing existing properties, there are lenders who recognise the unique needs of self-employed borrowers who are looking to build a new home.