Low Doc Home Loans
Searching for info on Low Doc Home Loans can be frustrating with the lack of details and criteria provided by lenders. This page will provide you with all the right information for you to make an informed decision about applying for Low Doc Home Loans.
What are Low Doc Home Loans?
In a nutshell, Low Doc Home Loans are mortgages that are obtained quickly by providing less documents and supporting information with your loan application. For example when lenders (like the big 4 banks) ask for your supporting documents for a home loan they usually require last 2 year tax returns or financials. With Low Doc Home Loans, this type of information is not a necessity and the loans can be obtained with ease and less headaches and with other information provided.
When to use Low Doc Home Loans
Borrowers who are having difficulty with the banks, or don’t want to go to the banks, are prime candidates for Low Doc Home Loans. This may be because they need fast funding (in days of approval), they may have poor credit history or, as mentioned above, they don’t have tax returns or financials for a full doc loan.
Who can qualify for Low Doc Home Loans?
As these loans are less stringent and more flexible, the LVR or Loan to Value ratio is a little lower than full doc loans. Typical Low Doc Home Loan lenders will lend to 65% to 75% of the property value.
The term of the loans is usually also less as they are a short to medium financial solution, they are not a long term solution. Usual terms for Low Doc Home Loans are 1 to 24 months. Therefore, you need to have an exit plan to repay the loan within the agreed term for example you might refinance by this time into a full doc loan, sell the property or repay by some other means.
Given the short nature of the loans they can be more expensive compared to your traditional funding line.
4 reasons why to use Low Doc Home Loans from non bank lenders
- Funds can be obtained within days of formal approval.
- Security can be a first mortgage, second mortgage or caveat.
- You deal direct with the decision maker.
- The loan criteria can be customised and flexible to your needs.
Who is the typical applicant for low doc loans?
Low doc loans are usually intended to meet the needs of self-employed people or small or medium sized business owners who don’t always have the normal income documentation available. For example, you might own a low cash-flow based business such as retail or direct sales or you may receive a steady stream of income with limited traditional documentation.
What do applicants generally have to provide as documentation?
Low doc loans generally require some form of documentation in order to apply for the loan, however what can be considered is often far more flexible and taken on a case by case basis. For example, one form of documentation that is accepted for low doc loans is a business activity statement (BAS) and an accountants declaration.
Where do you find low doc loans?
Low doc loans are easy to find on the Internet. You can usually obtain information on what is required and what providers have the best reputation. Some provide a verbal yes or no over the phone so you are not wasting your time or theirs. All it takes is a few minutes to answer a few short questions.
Benefits of a low doc home loan
Bank criteria is often hard to meet. Traditional loans often require you to submit financial statements and tax returns. A low doc home loan doesn’t require you to submit all this documentation for financing. You may have to submit a statement or two to justify your income, but it’s much less overwhelming than what traditional home loans require. It may also be that you have credit issues or some other issue where you need a low doc home loan.
Why people seek a low doc home loan?
As we mentioned, people seek a low doc home loan because they don’t want to deal with all the paperwork of a traditional loan with banking institutions. They can get fast and quick finance from private or non bank companies that often provide better personalised service. They want to get their financing as quickly as possible by doing as little as possible which often at times is understandable.
When should you seek a low doc home loan?
When you need the funding or know that something is coming up, touch base with a non bank lender who can assist and get a quick answer over the phone or email whether they are likely able to assist. You can apply from there, funding can often be provided in days of final approval.
All communication is normally done online, email, phone, or post, which makes it easy.
The Benefits of Low Doc Finance
• You don’t need a lot of documentation to apply.
• People with bad credit can apply and are often accepted.
• People who have been rejected by banks can apply for low doc finance.
• They can give you the funds you need to purchase a home quickly and easily.
What do you need for low doc finance?
For low doc finance, you need to have equity in your home or cash to contribute to the purchase. A loan amount can be up to 65% to 75% of your property’s value.
You also need a strong exit plan (sale, refinance, cash flow etc). This strategy ensure you are able to pay off the home loan in a short to medium time. Other requirements vary from lender to lender.
What are low doc home loans Australia for?
These flexible documentation loans can be used for just about anything. Many people or businesses use them for buying real estate, business funding, or making emergency purchases.
More reasons on why to apply for a low doc loan?
There are many reasons why a low doc loan may fit your situation. Some of the most common reasons are:
- You need money extremely quickly.
- You don’t have the typical documentation require to prove your income.
- You don’t want the hassle of applying with a traditional lending institution.
- You’ve been rejected by a bank for a loan.
- Low doc home loans Australia are available to everyone living in Australia to apply.
- They offer a source of funding without a large amount of documentation.
- They are more flexible.
- They offer solutions for those who are self employed.
- They offer loans for those who have non-traditional occupations.
What are the differences between low doc loans Australia and traditional loans?
Low doc loans Australia are loans that require less documentation than traditional loans. There are other differences between the two types of loans:
- It is easier to qualify for low doc loans Australia.
- You don’t need to “fit the box” or provide as much documentation to apply for low doc loans Australia.
- Bad credit is often okay.
- They have a higher interest rate than traditional loans given the risk to the lender.
- They can be extremely quick.
What is a low doc mortgage?
A low doc mortgage is the same as a low doc home loan, its just a different term used. A loan that does not require the traditional financial documentation many banks request is a low doc mortgage. It allows a person who does not have conventional income or information to benefit from a mortgage.
These mortgages can do a number of things. They are useful for obtaining large sums of cash quickly “cash out”, or these loans can be used to start businesses, provide funding for new construction, and allow for major purchases.
Recap, who can use them?
- Self-employed individuals.
- Individuals who are just starting out.
- People who cannot confirm their income.
- People who are in a primary cash business.