Low doc (low documentation) loans are perfect for people who cannot verify their income during application for a home loan. Because lenders are very strict in approving loans, a lot of people are finding it extremely difficult to obtain a home loan. The lack of proper documentation keeps these people from fulfilling their dreams of home ownership – this is why low doc loans are available. These are designed to help people get loans, despite not having enough proof of income. Low doc loans also makes qualification easier for those who also have debt items, like allied collections, on their credit report.
There are many types of low doc loans available for everyone. A few examples are CBA low doc, ANZ low doc, and Westpac low doc. It’s a good thing that there are different lenders that are now offering this kind of loan, because this means more people are going to have the opportunity to buy their own homes.
Why is there a need for low documentation loans?
These loans are created to provide assistance to people who cannot prove their income to lenders. Before they can apply for a loan, they have to make sure that they have a stable source of income. This is a big requirement because lenders want to make sure that whomever they lend money to, will be able to meet monthly mortgage payments.
But not everyone has permanent employment. There are several types of individuals who don’t work exclusively for a company. They are freelancers, contractors, and self-employed individuals. These people make good money, enough to afford a house, but since they are not with a particular company, they would not have proper documents to show lenders proof of their financial status.
This is what makes things difficult for a lot of people. They can afford a house, but technicalities (like paperwork) will make it impossible for them to get the money they need to buy a house.
What can borrowers do to obtain a loan?
So what can these people do? It’s either they try to get into a company or find other means to get approved for loans, without having to present specific documents. The former will be hard to consider, because they could already be making good money with their jobs. The only option would be to look for another way to get approved without submitting all the required documents.
Low documentary loans will not require a lot of paperwork. Lenders that process them are going to use alternative means to check a borrower’s eligibility. An alternative proof of income should suffice. This makes things easier and faster for both parties.
How hard is it to get a low doc loan?
Is it hard to get a low doc loan? No, it’s not. Aside from the fact that it will not require you to submit a lot of things, it’s also designed to make loan application very quick and easy. And if you have a very good mortgage broker, you should be able to know everything you need to do. You’ll have no room for errors and you will be pointed in the direction of the right lenders. And if your credit report has any mistakes, like Cach debt collectors or any erroneous debt item, you can get it removed before applying for a low doc loan.
Why Should You Apply For a Low Doc Loan?
First off, if you are self-employed and don’t have a regular income, then a low documentation loan may be a good fit for you. Remember that if you provide more information to the lender (such as a letter from your accountant), the terms of the loan (and the interest rate) will be more favorable.
What Should I look Out For?
Because of the higher risks associated with these types of loans, a lender will generally charge higher interest rates. If you go with a type of low doc loan, called an asset lend – which sometimes requires no documentation at all – then be prepared to pay higher interest rates.
Another thing to think about is mortgage insurance, which is something that a lot of lenders will make you get as a requirement for the loan, which further adds to the cost. Higher deposits are also usually requirement, as well.
There are 3 main types of Low Doc or No Document Loans.
No Ratio Loans
These loans are for borrowers who don’t want to reveal their incomes; thus a lender does not have to consider the amount of debt you owe, in comparison to the amount of your income. Decent credit and a reasonable amount of assets (from the borrower) is a criteria that has to be met, in order to be seriously considered for the loan. If gathering income documentation is going to be a logistical nightmare, then this loan can provide a more efficient streamlined process. Assess your credit report to see if there are any errant debts that need to be resolve – CleanUpCreditFast.org/Free/Help can help you remove items that were wrongfully placed on your report.
No Doc Loans
To get credit, the No Doc loans requires the least amount of documentation. The lender evaluates your loan request with the minimal amount of financial information from the lender, and maximum privacy is assured.
Stated-Income (Low Doc) Loans
If your income fluctuates week to week, month to month, the Stated-Income, or Low Doc loans is the most attractive. However, unlike the No Doc Loans, the Low Doc Loan does require the lender to disclose earnings, usually for two years, and might need to show tax returns and bank statements.
If a No Doc or Low Doc loan is right for your situation, seek the counsel of a mortgage broker. It might be beneficial for you to pay a higher rate for this loan. A good mortgage broker can also show you how to obtain the necessary documentation.