Did you know that over 67% of Australians own their own home? That is over 5.4 million homeowners across the country! Despite such a high number of homeowners, a surging housing market is making it more difficult to buy a home. Individuals are seeking new ways to secure their first home or their dream home move.
Homeowners have so much to think about when applying for finance! Unfortunately, they may not realise the great low doc home loan options available to them. Here, we have provided tips and information about how YOU can easily secure a low doc mortgage!
Buying a property in Australia
To buy a property in Australia, you must meet various financial requirements. It can be a confusing and arduous task to find the best lender and then the most favourable rates. Of course, you then need to find the perfect home for the perfect price!
Most people will visit a reliable mortgage broker to ask for advice and to let them remove the hassle!
The standard type of mortgage available is a full doc loan.
Full Doc Loans
What are the requirements for a full doc loan application?
- You must first prove your identity and submit your passport or driver’s licence. A birth certificate is usually accepted too.
- You will need to show evidence of your assets, such as properties and vehicles. You will also need to show proof of any liabilities you are responsible for, such as debts.
- Further information you will need to provide includes your monthly expenses and your regular income.
- Usually, you will need to submit your payslips, if you are a regular employee.
But what if you are not a regular employee on a salary or pay as you go (PAYG)? How could you prove your income and apply for a home loan?
What other mortgage options are available?
Not everyone fits the typical requirements for a full doc loan. Self-employed borrowers and borrowers in unique circumstances may need to access different mortgage options.
A key option available for some potential borrowers is the low doc loan, sometimes called alt doc loans.
Low doc loans are a great option! They are perfect for individuals who do not have the usual financial evidence, due to being self-employed for example.
But what are low doc loans and how could you apply for one?
What are Low Doc Loans?
Quite simply, a low doc loan is a mortgage application where alternative financial evidence is accepted. A low doc loan is perfect for self-employed individuals or sole traders. It is also useful for individuals whose financial circumstances do not fit the status quo.
Why use a Low Doc Loan?
A full doc home loan is not practical for some people.
Unless you have been in a regular job for a period of time, you may struggle to provide proof of your income. Why should you miss out on applying for a mortgage that you are capable of paying back?
We don’t think you should miss out!
Who are Low Doc Loans for?
Low doc home loans are for people who do not meet the rigid requirements of full doc home loans.
What if your income has significantly increased since the last time you submitted a tax return? This could be true for many Australians affected by the Covid-19 pandemic who experienced a decline in income during 2020. What if they are currently experiencing a fantastic increase in income? A full doc home loan would only consider income data from their last tax return.
However, some low doc home loan lenders may accept your Business Activity Statements and bank statements as evidence. This provides an accurate and real-time picture of your income now, not from a couple of years ago!
This is where low doc home loans come into play, providing you with a different way of evidencing your income.
How do Low Doc Home Loans work?
So, you’re self-employed and want to apply for a home loan. You do not have payslips to prove your income or a PAYG statement, so what can you do?
You can apply for a low doc home loan that considers your unique circumstances.
Low doc home loans have improved dramatically in recent years. When low doc home loans were first created, very few lenders were interested. Interest rates were high and rigid criteria were set for individuals to meet.
Today, the low doc home loan market has opened up, providing you with a choice of lenders and rates. You are in control! With so many options available, which is the best low doc home loan for you? Which low doc home loan rates should you consider?
Our expert brokers can guide you through the low doc home loan process, so you don’t have to worry! We will narrow down the best low doc home loan rates and lenders applicable to your application!
What do I need to apply for a Low Doc Home Loan?
Quite simply, you need:
- Your Australian Business Number (ABN)
- Business Activity Statements (BAS)
- Bank statements
- Income Declaration Form
You will need your Australian Business Number and your Business Activity Statements. These requirements should be easy for you to locate and show recent activity. You will also need recent bank statements.
You may be required to complete an Income Declaration Form for a lender to verify your income. An Income Declaration Form is a self-verification that asks you to sign that all information included is true and accurate. It also asks you to confirm that you can meet the repayments.
Some lenders may request a clarification letter from your Accountant, as well as GST registration details. However, these requirements will vary depending on the lender, and it can be confusing to know what each lender wants!
Our professional broker can help you to choose the best provider for you!
Sometimes referred to as alt doc home loans, low doc home loans can provide the key to your dream home! Why delay applying for your home loan when there is a perfect option for you now?!
Contact your local, expert mortgage broker to discuss low doc home loans and which lenders are available to you!
Who can apply for a Low Doc Home Loan?
A low doc home loan is tailored for the self-employed professional. However, it is also a great choice for contract workers and employees who work casually or unconventionally!
If you are looking to secure a loan for business purposes, you could consider a no doc loan.
Self-employed Australians
If you are self-employed, you might find it challenging to apply for a full doc loan. Proving your income will depend on past tax returns. Tax returns do not provide a real-time picture of your current financial status and may not do justice to your business. Your business may have suffered during the Covid-19 restrictions, so tax returns may show low historical profits.
Alternatively, you may be relatively new to self-employed working or freelancing and may not have two years of tax returns to show lenders. You know how successful your business is, but only a real-time picture can support this.
Submitting the documents required for a low doc loan allows the lender to assess your recent earnings.
Investors
If you are an investor, you probably won’t receive a regular and standard income. You may find it difficult to apply for a full doc loan and may not know where to turn for advice! Your expert mortgage broker will guide you through your options in securing a low doc loan.
Contract and Seasonal Workers
A salaried worker can easily prove their income, but what about contract workers? Perhaps you work seasonally or move from contract to contract? Irregular income does not fit the requirements of a standard full doc loan. A low doc loan could be the perfect fit for you instead!
You can still apply for a low doc loan even if you are not self-employed or a small business owner! Our professional brokers will tailor low doc loan options for you. This will require different evidence as a contract worker.
Sole Traders and Small Business Owners
A low doc loan could be the perfect option for sole traders and small business owners! Even if you have only operated as a sole trader or small business owner for a short period! Your recent financial evidence will be taken into account, with your expert broker finding a range of low doc loans.
People with bad credit
Have you made some poor financial choices and missed a credit card payment or two? You may assume that this means you cannot apply for a home loan until your credit score is better. However, a low doc loan could be available to you today!
There may be some additional factors to consider, such as providing security for your low doc home loan. Or, you may have to consider much higher low doc home loan rates than you initially anticipated.
Contact your expert mortgage broker to discover what lender options are available to you!
Recently arrived in Australia?
If you are new to Australia, you may think that you cannot apply for a home loan. However, this may be a possibility! Your mortgage broker will be able to provide you with tailored options, but low doc loans could be a great choice!
In some cases, you may need permission from the Australian government before buying a property. However, we will let you know what requirements you need to meet, so get in touch today!
What other loan options are available?
A no doc loan or a low deposit or no deposit loan are additional choices to think about.
No Doc Loans
You could consider a no doc loan where zero evidence of income is required. However, lenders may require you to sign a statement to declare your assets and liabilities. This loan type is perfect if you want to secure a loan for business purposes. You may need a commercial property for the no doc loan to be secured against.
To secure a no doc loan, the loan must be in your company’s name. The loan security should be in good condition and in a saleable condition. Up to two-thirds of the property value may be borrowed by no doc borrowers although interest rates may be higher. Additionally, loan terms may be much shorter.
Poor credit history will mean higher interest rates, however, although our expert brokers will still have options for you!
No or Low Deposit Home Loans
On average, Australians need a 20% deposit when securing a mortgage. This can be a significant amount to save! With the median value of an Australian property reaching $738,975, a 20% deposit could total over $147,000! With the average Aussie earning $67,860 per year, it could take a long time to save such an amount!
Ask us today about no deposit or low deposit home loans tailored to meet your needs.
Will you be approved?
Every lender will set their own requirements when considering a low doc home loan. If you choose to find your own lender, you may miss out on some great deals with other lenders!
Visit your mortgage broker professionals and let us find the best deal for you and your circumstances!
Generally, full doc loan lenders will want to see evidence of your declared taxable income from the last two years. They will use these figures to assess whether your income is stable and determine the amount you can borrow.
Low doc loan lenders may ask you for Business Activity Statements and your Australian Business Number. You can find your ABN through ABN Lookup, a public information website. You may have to sign a self-certification to declare that you can meet repayments and show bank statements as evidence. Bank statements will also have to be evidenced.
How much can you borrow?
Low doc mortgages are a versatile option. Your trusted mortgage broker will guide you through which lenders would accept your application. They will also advise how much you can borrow and the best low doc home loan rates.
However, the amount you can borrow may depend on the interest rate attached to the low doc home loan. You may have to accept a higher interest rate to borrow a higher amount.
You may be offered a standard loan rate when applying for your low doc mortgage. This could help you borrow up to 60% of the property’s value.
If you are hoping to borrow up to 80% of the property’s value, interest rates will increase. You may have to consider slightly higher, more competitive interest rates to secure your home.
If you aim to borrow a significant 90% of the property’s value, much higher interest rates will be applicable.
Pros and Cons of a Low Doc Loan
What are the pros and cons of a low doc loan?
Pros
A low doc loan is an excellent choice for many individuals in Australia!
- You can use a range of different documents that are not normally acceptable for a full doc loan.
- You can evidence your current income.
- This is perfect if your income declined during Covid-19 restrictions!
- Low doc loans are great for people who are self-employed or freelance.
- They are a great option for small business owners and contract workers.
- If you have bad credit, you could still get a low doc loan!
Cons
Are there any cons to applying for a low doc loan?
- Going straight to a lender can make a low doc loan application confusing!
- Which lender will offer you the best deal?!
- Some lenders will charge higher interest rates for low doc loans.
Visit a mortgage broker to find out different home loan options today!
Key Takeaways
- An unconventional income does not mean that you cannot buy your dream home!
- You can apply for a low doc loan to submit a range of different financial evidence.
- You may need to submit your ABN, BAS, bank statements, and an IDF.
- This evidence shows your current income.
- Different lenders will require different evidence.
- Some lenders may charge a higher interest rate.
- Contact your local mortgage broker who will provide you with a range of options today!
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FAQs
What is the difference between low doc loans and full doc loans?
Full doc loans are standard mortgages, such as a fixed rate home loan given through a credit provider application. You will have to meet the standard criteria to provide financial evidence. You should evidence your assets and liabilities, as well as your expenses and income.
At this stage, you must inform credit providers of any property you own and any personal loan amounts that you are responsible for. To evidence income, you would be asked to provide payslips or similar documents.
As a business owner, you may show company financial reports and financial documentation.
The low doc loan option offers different criteria for people who do not meet the usual lending criteria set by credit providers. This will include self-employed borrowers and small business owners who cannot tick the usual loan application boxes.
The low documentation home loan interest rate offered may be higher than the standard full doc loan, however. Contact your impartial mortgage broker today to discover the best rates available to you!
Is it hard to get a low doc loan?
Not necessarily, but this depends on your circumstances and financial position. If you have a good credit history and have a larger deposit, securing a loan with minimal documentation should be relatively easy.
You must be an attractive borrower for lenders, so marks on your credit file MUST be avoided!
How much deposit you put down certainly increases your borrowing power and may enable fixed and variable interest rate offers. Lenders typically want to see BAS and your bank statements’ business activity statements. They will want to see your recent net income to assess whether you can afford repayments.
The lending criteria for low doc loan applications will differ depending on your lending criteria. A mortgage broker can determine which loan features will be available to you. Seek personal advice for alternative documentation loans and loan amount assessments from your broker today!
Is a low doc loan different to an alternative documentation loan?
No, they are the same! All the documentation required in alternative and low doc loans is the same! Some lenders will call those loans low doc loans, and some will call them alt, or alternative doc loans. But they both mean loans for the potential home buyer on the property ladder who may be self-employed.
You will have to show different evidence to a lending specialist to prove your declared income and employment history.
If you have an income but pay your own taxes then the low doc loan may be a great choice for you!
Contact a mortgage broker near you to seek advice and discuss your financial situation!
Contact your broker specialist today!
Whether you want to buy your first home, move to a different home, or buy an additional home, we can help you! We are experts in low doc loans, so contact us now if you think you fit the low doc loans criteria!
Low doc loans are challenging to navigate if you go straight to a lender, so let us find the best deals for you instead.
We never charge you any fees at all! After all, you will have enough fees and costs to pay if you do secure your mortgage! Our fees are received from the lender or the bank themselves. However, rest assured that our advice is impartial, and we have your best interests at heart!
We can help you, whatever your circumstances, so book a free consultation with us by clicking this link, and we will contact you ASAP! You can also send us an email at support@lendstreet.com.au.
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