Buying a home can be nerve-wracking and stressful and especially so when you approach lenders for home loans.
Add to the fact that you're self-employed or a contractor and such approaches can be even more daunting.
Luckily, there are loans that can help people just like you.
Enter: low doc loans.
What are low doc home loans?
Low doc home loans - or low documentation loans are an alternative for those who don't have all the usual documents that lenders ask for when approving a home loan.
NB: These documents generally include proof of income ie payslips as well as 100 points of identification and proof of savings plus liabilities and assets details and possibly tax returns and monthly expenses.
Generally speaking, most people can provide this documentation.
However, self-employed people or those working on a contract basis often find it difficult to provide proof of income as they don't receive regular income or payslips.
So, even if such people are earning quite a lot, they don't meet the standard lending criteria.
This is where low doc home loans can prove incredibly helpful.
How do low doc home loans work?
Firstly, "low-doc" doesn't mean no documentation is needed but rather, different documentation is needed.
In other words, you will still have to provide documentation for low doc home loans but because of the means of your income, this documentation will be different to those of your everyday earner.
So low doc loan lenders will instead need some, or all, of the following:
Your ABN and/or registered business name (preferably one that's been used for two years or longer)
A letter from your accountant clarifying your financial position
Bank statements
GST registration details
Business Activity Statements (BAS)
Tax returns
Signed income declaration form (as provided via lender)
What are the benefits and disadvantages of low doc home loans?
The major benefit of low doc home loans is the higher possibility they give self-employed and contract workers to obtain loan approval.
But there are several disadvantages too, namely that lenders see these borrowers as riskier than full-doc borrowers - even if low-doc borrowers are earning more.
Also, not every lender offers low doc home loans.
So be prepared for the following:
