A low-doc loan is a type of loan where the lenders can approve your loan without seeing your financial statements or tax returns. You may be required to sign the income declaration to confirm your income or provide a letter from your accountant.
The lenders consider a home loan as of when you purchase or refinance a property which you use for owner occupied purpose.
An investment loan is when you purchase or refinance a property which you use for business or residential investment purpose.
Low-doc lending criteria
In order to be qualified for a low-doc home loan, you must be self employed for at least 1 year or having minimum 2 years ABN registered.
You must also have some deposits, which have been saved for some time. Most lenders do not accept gift from parents or family member if you apply for low-doc loan. Savings are very important as it determines whether you are disciplined with your money and whether you can repay the home loan.
Size of deposits: In order to be eligible for the discount on interest rate, you are required to have minimum 20 per cent of the property value. Some lenders may offer more discount if you have more deposits.
Evidence of income: Some basic documents would be required for low-doc loan such as Business Activity Statements (BAS statements), letter from your account and business bank statements. If you can provide any of these documents and meet the banks’ lending criteria, they may offer you some discounts on interest rate.
Credit scoring: In order to be eligible for the most competitive interest rate, you must have a perfect credit history, which means that you have not had any defaults or missed the repayments on any existing debts. If you previously had defaults listed on your credit file, some lenders may provide you the loan but the interest rate would be relatively high.