We all dream of owning a beautiful and luxury home. But due to property rates touching the sky it is not possible to buy a home without taking loan assistance. However, everyone is not as privileged to get the loans approved quickly due to their financial status and lack of documents. If you do not have a fixed monthly or yearly income or can’t produce all the documents that any government employee can, how will you get the loan?
Don’t worry. You can opt for low doc property finance. It is meant for people like you who want to buy a house or a property, but they don’t have all the formal documents. If you are not aware of this loan, then worry not! Below we have explained everything that you should know about low doc property finance.
What do you mean by low doc property finance?
Low doc means insufficient documentation. Such loans are meant for the buyers who are either small-time business owners or self-employed professionals who don’t have access to all the necessary documents to get traditional loans. Such buyers cannot provide tax returns, financial statements, or pay-slip records. Their income is often fluctuating, and their economic activity is not as substantial as the bank would need. Most of the lenders and financial institutions require two to three years of personal tax returns or detailed profit and loss statement along with the accountant’s letter. Based on such documents, the amount of the loan and the rate of interest is decided.
However, such documents are not needed in low doc property finance. This loan was introduced in Australia by non-bank lenders in 1990. This loan allowed self-employed people to buy houses easily. It allowed them to show different kinds of documents that proved their ability to pay the loan. But providing loans to low doc or no doc applicants involves much higher risks. Therefore, such loans come with a higher rate of interest and more significant security deposits. But despite the high rate of interest, the demand for such loans was much higher, and therefore it became a mainstream product, and even the banking sector started to offer these loans.
Basic requirements of low doc property loans:
One must understand that a low doc loan doesn’t mean any doc loans. You would still have to give specific documentation and certification to the lender. Such documents make you a potential customer to take the loans in lenders’ eyes despite your flexible nature of income and financial status. Despite this, you will only be able to borrow a maximum of 60% of the purchase price. If you want to take an 80% loan of the purchase price, you will have to go for Lender’s Mortgage Insurance (LMI). You will have to provide them with the following certificates:
- Your credit history that should be clean.
- Papers to prove that you are self-employed for a minimum of 1 year. Some might require you to produce the papers of 2 years.
- Complete property valuations.
- You should not have any other loan on the property.
Other documentation you need to provide to get a low doc property finance
Here are documents that you would need other than the certificates as mentioned above:
- Registered business name.
- ABN or Australian business number.
- BAS or business activity statement of one year.
- Confirmation of GST registration for at least one year.
- Income declaration.
This is a piece of essential information about low doc property finance. If you wish to take this loan, you must do your research well to find out the lender who can provide you with this loan at the best interest rate. Now you can fulfill your dream to buy your house with this loan.
