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What Are Low Doc Loans?
If you’re interested in seeing what sort of mortgages are available for self employed individuals, one option to think about is called a low documentation loan – also known as a low doc loan.
These are a simple sort of loan for people who have an income and assets, but aren’t able to provide the required financial statements or tax returns.
The basis of such loans is suspended from the applicant announcing their own income derived from their organization, making these products the ideal alternative for those searching for self employed home loans.
How To Apply For a Low Doc Loan With Guarantor
The application process is different for low doc home loans due to the absence of normal documents being provided.
If your self-employed you’ll be asked to supply either a letter from your accountant, a bank statement showing your business income and expenses or a business activity statement (BAS) as proof of a trusted income.
Red Rock specialise in helping self employed people secure cost effective low doc home loans for investment or personal purposes.
They offer a wide range of products, providing solutions for a variety of walks of life.
How Much Can You Borrow?
Generally, you can find low doc home loans worth up to 85 percent of your house ‘s worth with a choice of flexible supporting files.
Usually the minimum residential loan $250,000.
Maximum low doc loan advance $2.5 million.
LVR means loan to value ratio.
Self-Certification means declaration of income
. Cash-out means equity release.
No construction or vacant land loans.
Fees, charges and terms vary for each product.
The market leading self employed home loans are tremendously popular amongst business people seeking a flexible and fuss-free mortgage alternative.
For example, Red Rock we have been getting low doc loan approvals for self employed business owners for nearly 10 years.
They’ve got access to a wide selection of low doc home loans that can accommodate a wide array of purposes and preferred supporting document standards.
Low Doc Loan Options
There are a range of highly competitive low doc home loans suitable for a variety of purposes including:
Loans for property transfers & purchases
Refinances with unlimited equity release
Refinance & debt consolidation (inc credit cards, personal loans, car loans, etc)
Loans suitable for business growth or to replace costly overdrafts
Loans suitable for companies and trust applicants
Choice & flexibility in files provided, including NO BAS, and NO bank announcements options
Loan products with no mortgage insurance
Flexible self employed low doc loans for commercial purchases and refinance
Specialist low doc loans for applicants with a less than ideal credit history
Qualifying for a Low Doc Home Loan
There are three prerequisites that need to be fulfilled before you can consider applying for low doc home loans. Here is a general overview:
You Have to Be self employed with an active business registration (minimum of six months old, preferably 12 months)
You need to provide an accountant’s letter or a business banking statement or a business activity statement
You Want a minimum deposit or equity worth 20 percent to put towards your home
How will my Low Doc Home Loan Program be Assessed?
Most lenders look for the following key attributes on your low doc home loan application to determine your eligibility for the loan.
These points are summarized below:
Your business registrations area key determinate lenders use to ascertain your length of self-employment.
The longer your registration history the better, as it shows your longevity and consistency as a self-employed business person.
Your credit history is very important, the lender is relying upon your past credit performance in ascertaining your eligibility for new credit.
Whilst minor defaults and conclusions can be accepted a clean or clear credit history is the most favorable.
In general the age of the default is considered, the older the default the better, as it is more favorable to the applicant if a lengthy time interval has passed since the default incident has occurred.
Deposit or Equity Contribution
Normally a minimum of 20 percent is required in the applicant(s) for a purchase or low doc loan with guarantor.
The maximum loan to value ratio (LVR) is normally 80%, but we do have a low doc loan product that will allow up to 85% for a purchase transaction.
Net Asset Position
Your overall net asset position reflects the financial strength of your application.
This is your gross asset values minus your current liabilities. The higher this figure the better.
When you apply for a low doc loan you may be asked to provide a recent announcement on any existing mortgages.
This is to demonstrate that you are making the obligated payments on these debts and that they are being managed within your credit limits.
For refinance transactions it is a standard requirement that you supply 6 weeks statements for your existing mortgage(s) to be refinanced and normally 3 months statements for any other debts you would like to consolidate (or pay out) from the proceeds of the loan.
This is an integral determinant when applying for a low doc loan.
Lenders rely more heavily on the location of the property in assessing their risk when lending under a low doc arrangement as they aren’t relying as much of the applicants income proof.
Most metropolitan property will be considered up to maximum loan to value ratios, whilst regional property will often be considered at lower loan to value ratios.
Maximum Loan Exposure
Lenders have prescribed limits to restrict their vulnerability and risk to what is considered a higher risk self employer debtor segment.
The most common maximum exposure per debtor group is $2.5m (i.e a husband and wife s total borrowings combined) or normally $1 million per loan.
Or cash out as it is often referred is where an applicant is seeking to refinance an existing debt and obtain additional funds the cashout for investment or personal purposes.
Some lenders limit required evidence for the purpose of the cashout when applying under a low doc borrowing arrangement. Most of our products permit unlimited cashout.
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