What Are Low-doc Loans
Low doc home loans, as the name suggests, are home loans offered to home buyers who have minimum documentation to back up their application when buying a property. These low documentation loans are therefore of importance to contractors and self employed people who have little in the way of financial records, or up to date taxation returns, to show a lender when making application for their home loan.
Banks and other lending authorities have traditionally loaned to applicants with guaranteed incomes and a proven track record of saving but with the modern trend of many workers taking up contracting positions where they were once individually employed by large companies, a large number of potential home buyers were left out in the cold. Low-doc home loans became a way of accommodating such people and are now offered by most banks and home loan lenders.
What are low-doc loans – Requirements other than documentation.
The lack of the required documentation that is normally needed to secure a home loan is replaced however by the applicant having to have sufficient equity in the property to lower the risk to the lender, as well as requiring the following:
- Be able to insure the mortgage, although some lenders are willing to absorb this cost within the loan.
- Be willing to complete a declaration stating your income if you are unable to produce other proof on income.
- Be able to show Australian Business Number (ABN) registration for a period of two years prior to making application for the low-doc home loan.
- To hold a at least 20 per cent equity in the property although some lenders will require more.
- Be able to show a good credit history with no more than two mobile phone related defaults as long as these small defaults are under $500.
Many lenders will allow a low-doc home loan holder, who later finds him or herself able to produce financial and taxation returns that would normally satisfy regular home loan requirements, to have the loan reassessed to a more standard loan carrying a lower interest rate. Other lenders may give discounts off interest rates as a reward for the lender for servicing the loan with no defaults or arrears having been occasioned over a certain period of time.
What are low-doc loans – Variations from standard home loans.
In the past low-doc home loans attracted a higher interest rate than did the more regular standard home loan on offer to people who could produce all the required documentation, but competition in more recent times has seen lenders offer low-doc home loans at similar rates as their other comparable home loans.
Some of the main differences between low-doc home loans and other more regular types of home loans can include the following points:
- A low -doc home loan is valuable for home buyers who experience problems in proving their high level of income because of their manner of writing off expenses, putting their earnings back into their businesses or being purposefully slow in lodging taxation returns.
- A low-doc home loan applicant doesn’t have to produce company financial reports or taxation returns in the same manner as do other home loan applicants.
- Lenders will accept an income declaration that confirms the applicant can afford the loan and has the ability to repay.
If you wish to find out more about low-doc home loans please feel welcome to contact Home Loan Finder here.
Related posts:
- No Doc Home Loans
- Low Doc Loans – Features & Eligibility
- How to Get a Home Loan with Bad Credit
- Is Home Ownership Possible with a Low Doc Home Loan?
- Low Doc Loans in the Recession
- Home Loans for the Self Employed – Full Doc & Low Doc Home Loan Requirements
- No Income Verification Home Loans
- Low Doc Home Loans
- Can Self Employed Workers Get A Home Loan?
- Fox Symes Low Doc Home Loan
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