A “Lo Doc” or sometimes call “Lo Doc Home loan” are mortgage or home loans where documentation for verification of your income is not required. However, all other documentation is.
These loans are ideally suited to self-employed, independent contractors, investors, credit rating impaired, ex-bankrupt or clients with arrears on current mortgages and borrowers who have been rejected by traditional lenders. Including people with suitable incomes but to meet bank verification takes valuable times and money.
Low Doc Home Loans (Low Document) are usually slightly more expensive than traditional loans due to the higher risk profile.
This is primarily for people who are looking to purchase investment properties, residential or refinance existing housing property and don’t have PAYG or current taxation returns confirming their income, which normally sustains a standard investment loan.
There are 3 main types of Low Doc or No Document Loans.
No Ratio Loans
These loans are for lenders who may not wish to disclose their incomes, Thus there is no debt to income ratios for the lender to consider. Good credit and abundant assets the No Ratio borrower has makes up for the lender not considering the borrower’s income information. If gathering income documentation’s is going to be a logistical nightmare, then this loan can offer a quick and easy process.
No Doc Loans
To get credit the No Doc loans requires the least amount of documentation. The lender evaluates your loan request with the minimal amount of financial information from the lender and maximum privacy is assured.
Stated-Income (Low Doc) Loans
If your income fluctuates week to week, month to month, the Stated-Income, or Low Doc loans are the most attractive. However unlike the No Doc Loans, the Low Doc Loan does require the lender to disclose earnings, usually for two years, and might need to show tax returns and bank statements.
If you think a No Doc or Low Doc loan is right for your situation, talk to a mortgage expert. It might be beneficial for you to pay a higher rate for this loan. A good mortgage banker can also show you how to obtain the necessary documentation.