Low Doc Home Loan Requirements: If you require a home loan for self employed and get paid in cash, or just don’t have a lot of documentation to prove your income, then you know about that you are an exception to the rule when it comes to being able to get traditional financing.
You have a good stable history and healthy monthly income. You just don’t have a pay stub. Unfortunately lenders just don’t want to loan money to people who can’t prove they can pay it back. Lucky for you the financial services sector has recognized that there are all sorts of special borrowing needs. Low doc home loans have been developed just for people like you.
The main documents that can be used to verify your income for a low doc home loan are:
- 6 to 12 months of Lodged BAS Statements where the lender uses a formula of between 40 > 60% of Sales as income (depending on type of business)
- An Accountants Letter verifying your income.
- 3 to 12 months of Business bank statements
- Old tax returns (over 24 months) in combination with current financial statements.
Low doc home loans are simply loans that don’t require the normal battery of documents to prove your income. Instead, a borrower will sign an affidavit that certifies their annual or monthly income. Almost sounds too good to be true doesn’t it? There is no question that lo doc loans can be a convenient and practical alternative to conventional financing. Considering the special circumstances of someone who just cant document their income they may be the only alternative. The application process is simple and streamlined. So what’s the downside?
The biggest negative factor in using low doc loans is the cost. Because the banks or other lending institution is taking on additional risk by providing financing to people with little proof of income, they need to be compensated for it. As a result, lo doc home loans can be more expensive than regular loans. This applies to both interest rates and processing fees. As a rule of thumb you can expect to pay 1-2% higher rates for lo doc loans. Depending on the actual loan you get, they may also carry additional fees. If you are using the low doc loan to finance a house, you can expect to put down a larger down payment since many low doc mortgage loans will finance no more than 80% of the value of the property.
Despite the additional costs, low doc loans are an excellent alternative for many borrowers. They work just like conventional loans and when you are shopping around for them you need to look for the same things you would look for when looking for a traditional loan. You want to look for the most favorable terms and the lowest overall cost. Do a little research to make sure that the companies you are considering are reputable and be sure to read the fine print. Remember, you are making a substantial commitment whenever you take on a loan and you don’t want to be in for surprises.
Low doc home loans are an excellent alternative for borrowers who just don’t fit the traditional mold. They can be a good deal for you, the borrower, and a good deal for the lender. Just do a little homework to make sure you are finding the loan that’s best for you and make your application. Before you know it you’ll have the financing you need at terms you can afford whether you have clean credit or a low credit score.