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A brief guide to low doc loans

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Australia is a hard-working nation. We love the challenge and freedom involved in taking hold of our own future, whether this means running our own business, freelancing or doing contract work. However, when it comes to property investment or securing a home, there are a couple of barriers that you might face. You might have a regular, stable income but without written proof, lenders can be a bit unforgiving. 

You shouldn't let this turn you off buying a home – luckily, there is a solution that could work for you. Low doc loans are a finance solution for borrowers who might find it difficult to keep their financial record keeping up to date, or aren't able to supply the range of documents normally needed for a home loan.

However, a lot of people aren't even aware that these loans exist or how they can help. The following guide can help demystify this product and put you back on track towards home ownership.

What do I need to apply?

Low doc loans might seem fairly self-explanatory, but there's a bit more to it than just that. Despite what their name suggests, low doc loans don't actually require less paperwork. It's worth checking in with your mortgage broker about this as each lender has their preferred set of documents. Make sure you allow plenty of time to get these records in order – going into the application process with your ducks in a line can make things a lot easier.

Instead of pay slips or employment contracts, you'll need to self-certify your income. This evidence normally includes:

  • Business Activity Statements, verified by the Australian Taxation Office
  • Bank statements showing income and expenditure for business purposes
  • A borrower's income declaration form, signed by your accountant, which lists all your income sources.

You're also required to have a registered Australian Business Number, or a Certificate of Incorporation, which proves to the lender that you've been in the same job for at least a year. If for some reason you've misplaced or can't find your certificate, you can request an extract of information about your business through the Queensland state government. This will cost $20.90 and take around 5 days to arrive. 

It always helps to enter the process with a solid credit history, as well.  

How much can I borrow? 

Lenders can be a bit more restrictive about how much you can borrow with a low doc loan. You generally cannot take out more than 80 per cent of the home's value and for a loan of 60 per cent or more, lenders' mortgage insurance is usually a must.

This isn't necessarily the same across all mortgage providers. Some might let you borrow with a higher LVR, but there might be extra costs involved. Have your mortgage broker on hand to explain all the fees and requirements before making a final choice.