Self-Employed Borrower: Understanding Low Doc Loans

More self-employed borrowers are looking to low doc home loans than ever before. When you’re self-employed, you face a minefield of high-interest rates, few loans available, and even fewer lenders. It’s a nightmare and it leaves you in a vulnerable state. Fortunately, the market is becoming more competitive, creating a demand for low documentation loans. These loans are quite common today and are aimed at those who’re self-employed. So, what should you know about a low doc home loan?

The Simple Idea of a Low Doc Loan

When you apply for a loan, you would need documentation to verify your income. Unfortunately, when you’re self-employed, the paperwork you have might not meet a lender’s criteria. With a low documentation home loan, that changes. You require minimal paperwork to prove or verify your income. This does make it an ideal choice for those who’re self-employed. Low doc home loans are more simplified and work quite similarly to other traditional loans.

You Might Need a Bigger Deposit

While there might be a few exceptions to this rule, most lenders will require you to have at least a 20% deposit saved when purchasing a home. This can be incredibly important as it reduces the risk to the lender and also shows you have funds to back your application. The more you save, the more positive you’ll be in the lender’s eye. It also helps to have savings beyond the deposit. To find out more, check out www.lowdocloansco.com.au.

You Will Need to Sign a Declaration

Most lenders will require you to sign an income declaration form. It’s an important document for the lender to have because you’ll list your approximate income and ABN. Lenders can vary, however, so some might require you to list assets on the declaration form. When you’re looking for low doc home loans, most lenders will need an income declaration. It can be a useful way to reassure lenders of your intentions to pay the loan back.

Interest Rates Can Vary

One of the more important aspects of a low doc loan is the interest rates. These rates can vary, considerably, and may depend on your current circumstances and credit history. For instance, if you have an excellent credit score and a clean history of loan payments, it will reflect positively on you. It could keep your interest rates at a reasonable level. On the other hand, if you have a low credit score and have defaulted on previous loans, that might signal higher interest rates. So, it’s important to understand how these rates can vary, especially for each lender.

Take the Loan Seriously

Low documentation loans have changed the market forever. It has given millions the opportunity to obtain a home loan and get on the property ladder. That is why low documentation loans are necessary today. Of course, this is a process that should be taken seriously. You need to approach these loans with a knowledgeable mind so that you fully understand what you’re getting into. Low doc home loans can be an ideal way to get on the property ladder with less hassle.