If your financial situation is best described as “complicated” you may find it difficult to secure a standard home loan with most lenders. Even if it is through no fault of your own, such as losing your job or a failed business venture, lenders have certain lending criteria they uphold for their protection and for yours.
If you have suffered financial setbacks in the past, but are now earning a steady income and are ready to own a home, there are still some options available to you. Some lenders offer a type of loan known as a low doc loan because they require less documentation and are available to a wider group of potential borrowers as a result.
While a few of the major lenders offer their variation of a low doc loan, lenders like State Custodians and Pepper Money specialise in offering home loans to borrowers who may not be eligible for a standard loan.
If you are unsure whether you’re the type of borrower who should consider a low doc loan, then read on to see some examples of who these loans can help.
Example 1 – Richard
Richard started his own café four years ago but the business was not as successful as he hoped and he was forced to default on the loan he had taken out to cover the start up costs. Since then, he has found a full time job that pays well and has paid back the money that was owed but the default is still listed on his credit report. Even though he has a steady income now and has been employed with the same company for three years, he knows that most lenders would be concerned about his credit score so he considers a low doc loan instead.
Example 2 – Marie
Marie started her own cleaning business two years ago and it has been going extremely well. She is excited to buy her own home with the money she has been saving but when she looks at the eligibility criteria for most home loans she realises that she has not be operating long enough to have the right documents to secure a mortgage. Not to be discouraged, Marie researches her alternative options and comes across a lender offering low doc loans that may be able to help.
Example 3 – Chrissy and John
Chrissy and John have recently come through a tough financial time in their lives. Chrissy was sick and unable to work for the better part of last year and John’s salary was not enough to cover all the bills. As a result, they used credit cards extensively and racked up a large amount of debt. While Chrissy is back at work now, and they are both earning a good salary, it would help to consolidate all these loans into one home loan payment but they would need to find a lender who understood their unique situation. John comes across a lender online who specialises in low doc loans and calls them to talk about their options.
If these situations sound familiar to you then you may also benefit from chatting to a low doc lender about what sort of options they provide that could help you own your own home. Remember, these lenders still need to be assured that you have a steady income to repay the loan and a deposit or equity saved up in your current home.
As you will be considered a riskier type of borrower the interest rates on low doc loans are usually higher than the standard rate and there may be certain restrictions or conditions that apply.