What Aspects Would Qualify You For A Low Doc Loan? 

Low doc home loans would be loans where the borrower would be unwilling or unable to submit proof of income. Therefore, these loans have been categorized as high-risk loans. It would not be wrong to suggest that a low-doc home loan would be riskier than a standard home loan. However, it has its requirements that you would be required to furnish to the lender to seek approval for the loan. 

Find below a few requirements for securing a low doc home loan. 

  • Providing Proof Of Credit History 

You would be required to provide the lender with or clear or good credit history. If you have two small paid defaults, even then, your loan would be approved. Nonetheless, anything more than two paid defaults would render the loan rejected. The two small paid defaults would be allowed if the amounts were under $500 and related to the telco. 

  • Minimum Equity As Security 

You must offer a minimum of 20% equity as security. However, the percentage might change from one lender to another, and most lenders might take more than 20%. 

  • Registered ABN Process 

You would be required to give proof of going through the registered ABN process for a specific duration. 

  • Form Of Declaration 

If you could not furnish proof of income, you would be required to fill out a form of income declaration. 

  • Furnish A Particular Cost 

Most low-doc home loans would be mortgaged and insured. As a result, numerous lenders might consider absorbing a specific cost attached to your mortgage insurance premium. 

It would be pertinent to mention that most low doc home loans have been made available through non-conforming lenders or banks. 

  • Higher Rate Of Interest 

Rest assured that a higher interest rate offered on low-doc home loans would be considerably higher than a standard variable home loan interest rate. Lately, lenders have begun to provide similar rates for variable and low-doc home loans. 

Differences Between Standard Home Loans And Low-Doc Home Loans 

Find below a few differences between a low doc home loan and a traditional home loan. 

  • Low doc home loans would not need proof of tax returns or income, a requirement for standard home loans. 
  • You need to fill out a declaration to confirm your ability to pay back the loan, but not in a standard home loan. 
  • Low doc home loans would be an attractive option for the self-employed. 

Hence, it would be in your best interest to be prudent while choosing the available options before applying for a low-doc home loan.

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