With interest rates remaining near historic lows, many Australians are finding now a beneficial time to seek out mortgage financing. However, some borrowers, self-employed individuals chief among them, may find it more difficult to obtain the financing they need.
The Australian recently reported that Jenny Boddington, chief executive at QBE Lenders Mortgage Insurance, said that despite favourable rates leading to a rush of mortgage borrowers, financial institutions are not loosening their lending standards.
Together with fears from some industry observers that rapidly rising home prices may lead to a housing bubble, it’s likely that banks will do everything they can to restrict lending to only the highest-quality customers.
And while plenty of self-employed people may have the income and assets necessary to obtain home financing, it can be much more difficult for these individuals to provide the required financial statements and tax returns necessary at the time of application.
Low doc loans may be the answer
Low documentation loans, also known as low doc loans, can help streamline the mortgage process for self-employed people, as applications require less financial documentation. These types of loans are typically approved based on an applicant’s self declaration of income derived from their business, as well as supporting paperwork, such as an Accountant’s Letter or bank statements.
Bad credit home loans can also help
Stringent lending standards can also leave those with less than perfect credit at a disadvantage. Fortunately, there are loan products available tailored for borrowers who may not fit the credit parameters of traditional lenders.
Borrowers with bad credit may need to put down larger deposits, but they are far from ineligible to receive a home loan. These types of mortgages are suited for individuals who may have tarnished credit histories due to defaults or judgments placed on their credit report.