Bad Credit Low Doc Loan

If you’re self-employed and have a poor credit history, getting a home loan can feel difficult, especially if you do not have up-to-date financials. However, being declined by a bank does not always mean you are out of options.

Low doc home loans are designed for borrowers who cannot provide full income documentation, and some specialist lenders will still consider your application even with past credit issues.

What Is A Low Doc Home Loan With Bad Credit?

A low doc home loan is a mortgage for self-employed borrowers who cannot provide full financial documents, such as tax returns or full financial statements. Instead, lenders use alternative income evidence to assess the application.

When bad credit is also involved, the lender is assessing both limited income documentation and past credit issues, such as defaults, late payments or bankruptcy. These loans are usually offered by specialist lenders rather than major banks, because specialist lenders are more flexible in how they assess complex applications.

Who Qualifies For A Low Doc Loan With Bad Credit?

You may be eligible if you meet the following requirements:

• You are self-employed with an active ABN
• You can provide some form of income evidence
• You have a deposit or equity (usually 15% or more)
• You can explain your credit issues
• You can afford the repayments

If you meet these lending criteria then we can help to get your mortgage approved.

Give our mortgage brokers a call on 1300 889 743 or enquire online and they’ll get back to you with the best options.

What Interest Rate Will I Pay On A Low Doc Bad Credit Loan?

There isn’t standard pricing for a low doc loan with a bad credit history. The lender will use a risk matrix to determine the overall risk of your application and their interest rate.

Here’s how they determine your rate:

• Credit history: The better your credit history, the better your rate.
• LVR: The higher the percentage of the property value that you are borrowing, the higher your rate. This is known as the Loan to Value Ratio (LVR).
• ABN age: Some lenders charge a higher rate if your ABN is less than two years old.
• Income evidence: The more income evidence that you can provide, the better your rate.

What is the secret to getting the lowest interest rate and fees?

Simple! Each specialist lender has a different risk matrix and sees different loans as a high or low risk. By matching your application to the right lender we can save you a fortune.

In addition to this we may recommend a few small changes such as getting a slightly larger deposit or paying one of your defaults so you fit into a different part of the lender’s risk matrix.

How Do Lenders Assess Bad Credit For Low Doc Home Loans?

The policies used by our lenders vary significantly. Some will consider loan applications that others will not and they often price the same loans in different ways.

So what do they look for when assessing your credit history?

• Size of credit issues: Small defaults are better than large defaults and large defaults are better than bankruptcy.
• Age of the issue: How long ago was the credit problem? How quickly was it paid or settled? These details can matter.
• Multiple issues: Several defaults at one time indicates a one off event but having the same defaults spread out over a few years indicates long term hardship.
• Default status: Is the default current, paid, unpaid, cleared out or settled. Each is assessed differently but all can be accepted.
• Bankruptcy & Part IX: How long ago was the problem? Are you discharged? If not, the new loan must pay out the bankruptcy.
• Debt consolidation: How many debts are you refinancing into the loan? Are they being paid on time?
• What went wrong?: Your story matters. Was it your fault? Have you learned from this experience? Will it happen again?

Don’t think that your situation is too hard! Give us a call on 1300 889 743 or enquire on our website and we’ll let you know how to get approved.

What Property Types Are Accepted by Low Doc Lenders?

All lenders want to have a standard property in a good condition and in a good location.

This is so that if you get into financial trouble in the future you can sell the property easily and why banks prefer units or houses in capital cities or major regional locations.

Vacant land, construction, hobby farms and small towns are considered to be a high risk security property so they are more difficult to finance.

Does the loan purpose matter?

If you are refinancing your existing home loan then the lender will look at if you are releasing equity and the repayments of your current loan.

If you are purchasing a property then the lender may look to see if you saved the deposit yourself or may look at your rental history.

Other loan purposes such as funding your business, buying investment properties or investing in shares are assessed based on their merits.

Ultimately, each lender has their own policies and credit criteria. It’s just a matter of picking the right lender for your situation.

Does the Loan Purpose Affect My Approval For Low Doc Loan With Bad Credit?

If you are refinancing your existing home loan then the lender will look at if you are releasing equity and the repayments of your current loan.

If you are purchasing a property then the lender may look to see if you saved the deposit yourself or may look at your rental history. Other loan purposes such as funding your business, buying investment properties or investing in shares are assessed based on their merits.

Ultimately, each lender has their own policies and credit criteria. It’s just a matter of picking the right lender for your situation.

What Income Evidence Do I Need For A Low Doc Loan?

Low doc loans still require some form of income evidence as required by the Nation Consumer Credit Protection (NCCP) Act.

The most common forms of income evidence are:

• Business Activity Statements (BAS): This shows the turnover of your business which is an indicator of your profitability.
• Accountants letter: Some of our lenders will accept a letter from your accountant that confirms your income.
• Business account statements: The cheque account statements for your business can show your turnover, which indicates your profitability.

You will also sign an income declaration form which is your statement to the lender informing them of your business income. The income you declare must make sense considering your age, asset position and the type of work that you are in.

What if you have no income evidence? Then, firstly, ask yourself if you can actually afford the loan! If you can then there is usually some way to prove your income.

If your loan is for business purposes, your finances are too complicated or you are behind with your BAS then a no doc loan may be suitable.

How Lenders Calculate Income From BAS And Bank Statements

Your income will be assessed as the lower of the income that you declare on your income declaration or the income assessed by the lender.

Lenders typically use 40% to 60% of your BAS or business bank statements turnover to assess your income. It can vary depending on the business that you are in. You can use our BAS Income Calculator to see how some of our lenders work.

For example, a cafe may have 40% of its BAS turnover assessed as income whereas a consultant may have 80% of their BAS turnover included. We can often argue your case with the credit department if there is a good reason to use a higher income percentage.

With an accountants letter however, the lender will just use the income that your accountant declared as long as it matches the income that you declared.

Apply For A Low Doc Home Loan With Bad Credit

If you’ve been declined by banks due to bad credit or can’t provide full financials, you may still qualify for a low doc home loan with the right lender.

We specialise in matching self-employed borrowers with low doc lenders that accept bad credit, including defaults, late payments and complex income situations. Because each lender uses a different risk model, choosing the right one can improve your approval chances, and reduce your interest rate.

Give us a call on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss your situation.