Do I qualify for a low doc loan?

Any general questions you might have in regards to loans and finance.
gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

Do I qualify for a low doc loan?

Postby gleeson » Wed Nov 12, 2014 11:02 am

Hi there,

I run my own business and get a yearly income of about $60,000. I want to get a home loan, and have $50,000 in savings. However, I have not filed any tax returns. One of my friends was saying that I cannot get a standard loan and may have to apply for a low doc loan. I am unsure about that and want to know if I will qualify for even that.

Could someone give me more information abut that?

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Otto Dargan
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Re: Do I qualify for a low doc loan?

Postby Otto Dargan » Wed Nov 12, 2014 11:34 am

Hi and welcome to the forums gleeson.

People who run their own business may have to resort to low doc loans if they are unable to prove their income through standard documents such as tax returns or financials statements. You still need to meet certain requirements in order to be approved for a low doc loan.

To apply for a low doc loan, you need to sign an income declaration stating your income. Even though you do not have to provide your tax returns, you will need to provide documents as evidence of your income. Different lenders have different policies on what they accept as proof of your income. You may need to provide one or two of the following documents:
  • BAS statements for 12 months showing a high turnover.
  • An accountant’s letter that verifies your income.
  • Business bank statements which show a high turnover.
  • Old tax returns.
  • Interim financial statements.
Lenders are required to have some evidence of your income under the National Consumer Credit Protection (NCCP) Act for them to approve your loan. If you are unable to provide one of these documents then you may have to apply for a no doc loan instead.

Most lenders require that your business has an ABN and has been GST registered for at least two years in order to consider lending to you. However, different lenders have different policies on this and one of our lenders can consider businesses that have had an ABN for just a single day.

The income that your declare needs to be reasonable given your age and income. An 18 year old intern who declares an income of $200,000 will certainly raise eyebrows and it is highly likely that the loan will be declined. Similarly, the asset to income ratio needs to be satisfactory. Lenders would not be willing to lend to people who have a high income but not enough assets to reflect it. As a general rule, your net asset position should be two times your gross annual income.

Most lenders allow you to borrow only up to 60% LVR for a low doc loan. However, some lenders may be willing to lend you up to 80% LVR, and one of the lenders on our panel can even consider a 90% low doc loan.

Cheers,
Otto
Otto Dargan
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P | 1300 889 743
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gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

Re: Do I qualify for a low doc loan?

Postby gleeson » Wed Nov 12, 2014 12:34 pm

Hi Otto,

Thank you for the comprehensive reply. However, I am not really sure what LVR means. Could you tell me something about that too?

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Otto Dargan
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Re: Do I qualify for a low doc loan?

Postby Otto Dargan » Wed Nov 12, 2014 1:23 pm

Hi gleeson,

Loan to value ratio (LVR) is one of the most important thing lenders consider while giving out a home loan. It is the ratio of the loan amount to the value of the property you are buying and is expressed in percentage.

Lenders use LVR as one of the indicators of the risk related to the loan. A higher LVR means a higher risk to the lender. If you want to borrow a high LVR, then you may have to meet additional requirements such as paying Lenders Mortgage Insurance (LMI).

If you would like to know more about these then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

Re: Do I qualify for a low doc loan?

Postby gleeson » Wed Nov 12, 2014 1:56 pm

Thank you for the explanation. Your website seems to include all the information that I need. Thanks again for having compiled such detailed info.

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cutie
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Re: Do I qualify for a low doc loan?

Postby cutie » Thu Feb 05, 2015 12:11 pm

Hi everyone,

I am confused why people take the hassle of providing their tax returns and other documents when they can easily get a low doc loan. Could you tell me more about that?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Do I qualify for a low doc loan?

Postby Otto Dargan » Thu Feb 05, 2015 12:56 pm

Hi cutie,

First of all, low doc loans are only or people who run their own business. If you are an employee then you do not qualify for a low doc loan. Another thing is that low doc loans have a higher interest rate than a standard home loan. You will also be required to have a larger deposit for a low doc loan. You may have to pay lenders mortgage insurance (LMI) if you are borrowing more than 60% of the property value.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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cutie
Posts: 45
Joined: Fri Jun 26, 2009 10:59 am

Re: Do I qualify for a low doc loan?

Postby cutie » Thu Feb 05, 2015 1:23 pm

Oh.. thank you for pointing that out to me. I am an employee so apparently I won’t qualify for a low doc loan.


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