Self-employed can offer great flexibility and autonomy at work. You are your own boss, choose who to work with and you organize your own holidays. However, when you are looking to purchase your own home, getting the Low Doc Home Loan can be quite an exercise.
Why Is That?
Lenders view self-employed applicants as high risk, especially because of consistency in income as well as the capability to earn profits. Typically, lenders will evaluate your earnings through two years of tax returns for you and your business. Lenders must verify your earnings. It is actually the law. But, your tax returns may not be up to date and your income may fluctuate as a self-employed person.
If you are a self-employed individual or small business owner, you cannot traditionally prove your earnings to banks. There is a great solution for you. We will walk your path to secure financing for your home through a Low Doc Home Loan.
What Is a Low Doc Home Loan?
Homeownership for self-employed individuals was a tough proposition until low-document loans came along. Getting a mortgage from lenders can be quite difficult for the average self-employed individual.
Low Doc Home Loans are generally designed for self-employed people looking for a way to get a mortgage. It lets you get a home loan with just some documents.
The key documents that can be used to prove your earnings are
- 6 to 12 months of Registered business activity statements where the lender uses a formula of between 40>60% of Sales as revenue.
- A Letter from Accountants verifying your earnings.
- 4 to 12 months of commercial bank statements.
- Old tax returns (more than 2 years) in combination with current financial documents.
What Do Lenders Seek When Evaluating a Low Doc Loan?
It is essential to note that each lender has dissimilar policies. But, these are the normal criteria for most lenders.
Duration of ABN
Borrowers must have a registered ABN and possibly a registered GST if sales exceed $75,000. Most lenders need ABN to be shown for two years. Several lenders accept a registered ABN for as little as six months.
Several banks accept Low Doc Home Loans up to 60 percent Loan-to-Value-Ratio at standard rates. However, others will consider up to 80 percent loan-to-value ratio on Purchases. Usually above 60 percent to refinance or withdraw, we need to apply through an expert lender.
Reasonable Earnings Reported for the Business
Lenders will make sure that the reported income of the borrower and current assets are in line with the trade and age. For instance, a 20-year-old courier with no properties would be rejected whether they reported an earning of $300,000.
If you have any problems with your credit card history, the major banks will not accept a Low Doc Home Loan. However, there are other choices available in the market now for mortgage loans if you have any marks on your credit file.
Every funder will assume a risk to the applicant but not to safety. Assets that are located in non-metropolitan or regional population areas or that are unique, in poor condition, or hard to sell are generally not accepted or have restricting terms.
Most lenders won’t refinance a remaining loan to consolidate debt up to 60 percent Loan-to-Value-Ratio. However, there are always options available in the market to secure capital above 60 percent Loan-to-Value-Ratio.
A lender can’t ignore a document that he sees when finishing their evaluation. To avoid this problem, provide just the documents wished by the lender, nothing more.