Low doc home loans are a great alternative for the Self Employed Australian applying for a home loan. Being self-employed on a contract basis is rewarding in terms of flexibility and having the ability to watch your business grow, but it can include some unique financial hurdles, not least if you wish to use to a bank or lender for a home loan. As a general rule, many banks and lenders are reluctant to approve applicants who cannot show the sort of documents that you just typically need for a loan application.

This means those that don’t receive a daily salary from an employer may need to contemplate alternatives to a standard home loan, which could include a low-documentation, or ‘low-doc’ loan. If you run your own business or are self-employed and need to use for a credit, you will find that these loans may be suitable for your needs, but it’s important to be mindful of their potential downsides also.

What are low doc home loans?

Low doc home loans are loans aimed toward those who wish to buy a home, but don’t necessarily meet standard lending criteria. The phrase ‘low-doc’ are a few things of a misnomer, because it doesn’t mean that you just will have to provide minimal documentation; rather, it implies that you’ll must provide evidence of your income outside of the quality documents that lenders typically require.

Like traditional home lenders, low-doc lenders normally require borrowers to have a clean credit history, however some low doc lenders will except paid or unpaid defaults and other bad credit.

Who can apply for a low-doc home loan?

Typically, low-doc home loans are aimed toward self-employed people and other people who run their own businesses. While the eligibility criteria will differ between lenders, it’s going to often be the case that you will need an Australian Business Number (ABN) to apply.

 What documents does one need for a low-doc home loan?

If you intend to apply for a low-doc loan, it’s likely that you will need a minimum of a number of the following:

  • Bank statements from your business or personal accounts
  • Details of your business, like its name and Australian Business Number (ABN)
  • Your BAS Statements (BAS) for the past 6>12 months.
  • Some lenders may accept a letter from an accountant, certifying that the accountant understands your financial position and can confirm that the income declaration you have provided about your annual income is true.

What size deposit will you need for low doc home loans?

Generally speaking, lenders consider low-doc home loans to be risky, so it should be the case that you simply need a deposit of a minimum of 20% to buy a property, whereas in other circumstances, lenders could also be willing to supply a ‘full-doc’ or standard home equity loan to borrowers with a 5% deposit.

Are low doc home loans harder to get since COVID-19?

Since the COVID-19 pandemic began, some lenders have become more cautious about approving low-doc home loans, and will have tightened their approval criteria accordingly. additionally to limits on the most LVR, lenders may want to understand how the pandemic has affected your business and cashflow. As a part of your application for a low-doc consumer credit, your lender may ask you to supply a COVID-19 impact statement, outlining if and the way your income has been affected, and potentially also how you propose to guide your business through the COVID-19 recovery period.