If you’re self-employed or don’t regularly receive payslips, a low doc loan could be key to buying your first home. Low doc loans allow borrowers who don’t have payslips to prove their income via alternate documentation and get the approval they need.
What’s involved with a low doc loan?
Low doc loans allow borrowers to get their application approved without having to provide the ‘normal’ documentation, such as payslips. They’re designed to ensure entrepreneurs or self-employed people can still get the loan they need to buy their own home.
These types of loans are also called no doc or alt doc loans, because the exact paperwork requirements vary between providers. Some lenders still require quite a lot of documentation but are willing to be flexible in exactly what evidence they accept. Meanwhile, some lenders require very little paperwork at all – although they have increasing responsibilities to make sure that the borrowers they approve can actually afford repayments.
Breaking the renting cycle
Many people rent because they either don’t have the deposit required to buy a house of their own, or because they believe they’re situation renders them unsuitable for a mortgage home loan. This means they spend years funding the rental market, spending their hard-earned money on someone else’s mortgage. Breaking the rental cycle is the dream, bringing with it a long-term financial investment and a personal home.
To make sure you’re eligible for a first-time buyer low doc loan, there are a few key things to organise before you apply.
- Personal record-keeping – It’s crucial you keep you financial records up to date so you can prove what you’ve earned and when, as well as what type of personal expenses you have each month, such as car loan repayments.
- Business financial statements – If you own a business, you’ll likely be asked for BAS statements from at least the previous 12 months of trading. If you can’t adequately prove your turnover, you may be able to self-certify your income with the help of your accountant, so it’s worth asking them what they can do to support your application.
- Proof of your business registration – You’ll also have to prove you have an Australian Business Number (ABN) and sometimes that you’ve had it for over a year. Some lenders require you to have been involved in the same industry for a specific amount of time too.
- 20 per cent deposit – Most lenders require at least a 20 per cent deposit, and you should also ensure you can afford the associated expenses.
Does every lender offer low doc loans for first home buyers?
No, not all lenders. In fact, all providers offer a different selection of products that cater to different borrowers. Knowing which lenders offer loans that suit your needs can be a long and laborious process. However, doing research at the outset prevents you losing time making applications that are never going to be accepted.
Often the easiest and least stressful route is to work with a specialist lending broker. The term ‘specialist lending’ refers to borrowers who fall outside of prime loans – not fitting the standard borrower criteria.
At Red Rock, we have a wide range of specialist lending products available. Our brokers are well-versed in the specialist lending market and know exactly which lenders will accept your application. Make an enquiry today, and we’ll have one our expert brokers in touch shortly.