Three Questions to Ask Your Broker When Applying For a Low Doc Home Loan

Being self-employed has numerous advantages. The freedom of being your own boss combined with a solid business plan and hard work has allowed many Australians to reap the benefits of a financially secure balance between work and lifestyle.

Working for yourself also means more control over your income and access to a range of tax advantages. However, when it comes to securing a mortgage the criteria you need to meet varies greatly to that of a salaried employee, and can be a complex and stressful process.  If you don’t have the verification of income to meet a lender’s specific requirements, your traditional home loan application could be rejected … unless you apply for a low documentation home loan.

Low doc home loans can be used for the purchase, refinance or renovation of both residential and commercial properties, and have been converting Australia’s 1.2 million sole traders’ home ownership dreams to reality since the early 2000’s.

With the new financial year upon us, there’s never been a better time to reassess your financial resolutions. If home ownership tops your list, it’s time to visit your mortgage broker and ask the following questions before applying for a low doc home loan:

1. Am I a Candidate for a Low Doc Home Loan?

Fundamentally, a candidate for a low doc loan is anyone self-employed who does not meet the normal bank lending criteria. So, if you’re a builder, developer, tradesman, entrepreneur, contractor or investor, the simple answer is yes!

While you may not have the tax returns, pay slips, or traditional proof of income that a PAYG applicant can provide, a low doc loan allows for three alternate ways of declaring your income:

1. A statement of declared income signed off by an Accountant on an applicant’s behalf.
2. Trading or business bank statements as proof of income, outgoings and expenses.
3. Evidence of trade activity and income forecast via the last four quarters of business activity statements (BAS).

2. Will I need to pay mortgage insurance on my low doc home loan?

Because of the unconventional method of substantiating income, low doc home loans are deemed to be a higher risk to lenders.

Once you borrow over 60% of your loan to value ratio (LVR), most lenders have to charge a one off risk fee or mortgage insurance for low doc loans. Generally speaking, the ‘risk fee’, or mortgage insurance incurred will be around 1% of the total loan amount.

An experienced mortgage broker will endeavour to partner their client with a lender who has either a zero or lower risk fee, but ultimately the right fit for your home loan requirements will depend on your unique circumstances.

3. Are there lenders who specialise in low documentation loans?

Yes, there are. The historic increase in applicants who don’t fit traditional lending criteria has been met with a rise in lenders specialising in low documentation, non- conforming, and alternative home loans.

Accessing a qualified, professional mortgage broker is the first step to ensuring your application is handled in the most cost-effective, flexible and successful way. They have the resources and knowledge to align your financial position with the right product to achieve your home loan dreams.

At Picket Fence Finance, we understand your situation and needs are as individual as you and your business. If you are seeking advice on a low doc loan, phone Picket Fence Finance on (03) 9696 3007. It will only take a couple of minutes to determine your eligibility, and you could be on your way to securing the home loan that’s right for you.

Picket Fence Finance Pty Ltd ABN 71 148 870 875 | Credit Representative 411186 is authorised under Australian Credit Licence 389328

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.