RateCity
Low Doc Loans
Low doc loans are a type of home loan offered by financial lenders that are targeted at the self employed who do not have all of the paperwork required to apply for full doc home loans. Low doc loans generally have a loan-to-value ratio (LVR) of between 60-80 percent. This means that you can only borrow between 60-80 percent of the property value and have to outlay the rest as a deposit.
The effects of the global financial crisis (GFC) caused many financial institutions to tighten their lending criteria, which made it harder for borrowers to be approved for these types of loans.
In late 2008 Genworth financial (a major LMI company) also added extra conditions to their existing LMI policy. While these changes require more paperwork from borrowers, it ultimately makes your loan application stronger and hopefully more likely to be approved.
The new conditions stated that borrowers wanting to take out a low doc loan also have to:
- Provide BAS Statements from the last 12 months (to better assess their income potential)
- Their ABN must have been active for at least two years and
- They must have had GST registration for at least 12 months.
