Securing a home loan can be challenging for self-employed individuals and business owners who may not have the traditional income proof required by banks. A low doc mortgage offers a solution, allowing borrowers to apply for a loan with alternative financial documents. However, while these loans require less paperwork than standard home loans, lenders still need sufficient proof of income and financial stability.
Here’s what you need to prepare when applying for a low doc mortgage in Australia.
1. Proof of Income
Since low doc loans are designed for those without conventional payslips, alternative forms of income verification are required. These may include:
- Business Activity Statements (BAS): Typically covering the last 12 months.
- Bank Statements: Showing consistent cash flow and income deposits.
- Accountant’s Letter: A signed declaration from a registered accountant confirming your income and financial position.
2. Australian Business Number (ABN) and GST Registration
Most lenders require applicants to have an active ABN, usually for at least 12 to 24 months. Some may also ask for GST registration as proof that the business is operating at a significant level.
3. Identification Documents
To comply with lender requirements and legal regulations, you’ll need:
- A valid passport or driver’s licence.
- Medicare card or other secondary identification.
4. Credit History and Existing Debts
Although low doc loans are designed to be flexible, lenders still assess your creditworthiness. A credit report outlining your current loans, credit card debts, and repayment history is essential. A clean credit record improves your chances of securing better loan terms.
5. Property Details and Loan Purpose
Lenders require information about the property you’re purchasing, including:
- A signed contract of sale.
- Property valuation reports (often arranged by the lender).
- Loan application outlining whether the property is for investment or personal use.
6. Asset and Liability Statement
A breakdown of your financial position, including assets (savings, properties, vehicles) and liabilities (loans, credit card balances), helps lenders assess your repayment capability.
7. Declaration of Financial Position
Many low doc mortgage lenders require applicants to sign an income declaration stating they can meet their repayment obligations. This document is crucial as it legally binds you to your declared financial position.
While a low doc mortgage offers flexibility for self-employed borrowers, having the right documentation is key to approval. Preparing financial statements, tax records, and business details in advance can streamline the application process and improve your chances of securing the best loan terms.
