Applying for a Low Doc Loan means that you will need to provide your prospective lender with certain information. This will assist them in deciding whether you are possibly able to make your mortgage payments and are a safe enough option to lend to.
The nature of a Low Doc Mortgage Loan is that you won’t have similar paperwork on hand as a regular borrower. However, there are several elements you will need to show a lender that you are reliable and trustworthy. These are just a number of documents you will need to gather before making that all-significant first approach to a home loan broker.
The most fruitful way to express the performance of your independent business is to show the required information in the form of bank statements. These will provide how much money is coming into your account and the expenditures you incur because of your profession.
Business Activity Declaration
A business activity declaration is adapted to the specific characteristics of each business and illustrates what tax requirements it is subject to. This covers everything from services and goods taxes to pay-as-you-go withholdings and fees. Evidence from the last twelve months must be given.
Letter from Your Accountant/Bookkeeper
Written evidence from your accountant/bookkeeper can be useful when applying for Low Doc Home Loans. This should describe what term and condition your business’s finances are in and act for the other documents you present to a lender.
Signed Borrower’s Earnings Statement
If you cannot provide proof of earnings, sometimes it is possible to submit a signed borrower income statement instead. This will show some level of security to the lender that payments can be met over the life of the home loan.
How Can I Get Approved for a Low Doc Loan?
Applying for a mortgage loan needs gathering all the required paperwork. It is no dissimilar with Low Doc Home Loans, you will only need to show other documentation. These are some steps to obtain approval for a low-documentation mortgage loan.
- Be careful with the Lender’s Mortgage Insurance criteria. If your loan-to-value ratio is 60 percent or more, low-doc loans generally charge LMI.
- Most lenders will require a 20 percent deposit for Low Doc Loan however, the more you save, the better your borrowing power.
- Obtain the required papers to prove your fiscal situation, such as a letter from an accountant, bank statements, or tax returns.
- Also, you will need to show an ABN (Australian Business Number) registered for a minimum of 2 years. But, several lenders may be lenient. Talk to your mortgage broker about ABN requirements.
- Increase your debt-to-earnings ratio. In general, a good balance is 2:1. You should aim to have twice as many assets as net earnings.
- Improve your credit file. Lenders generally use your credit score to fix the rate of interest. Because Low Doc Home Loans usually have a higher interest rate than full document home loans, you should do everything you can to obtain competitive rates.
Be sure to apply for Low Doc Loan only when you meet certain lending criteria. Your credit score may suffer if the lender rejects your application. See how: 5 Facts You Should Know About Low Doc Loans.