Low doc loans can be the solution for self-employed workers

19 Oct, 2017
Low doc loans can be the solution for self-employed workers

Numerous factors can make it difficult for self-employed people to get a home loan. But with a bad credit home loan from Red Rock Mortgages, Australia's self-employed can jump aboard the homeownership train too.

Why do self-employed people struggle to secure finance?

A lender wants to see evidence of your capacity to meet repayment obligations. As such, a newly self-employed person may be unable to prove this to a lender with the normal documentation. Salaried employees usually supply two or three of their most recent payslips, and the long-term self-employed will be able to show two years worth of tax returns. Both of these options are unavailable to the recently self-employed.

How can a low doc loan help?

When you're newly self-employed, the problem will often not be your ability to service your debts - it's your inability to prove you can. Thankfully, specialist lenders like Red Rock understand this and provide products that don't require the kinds of proof that normal financiers ask for.

A low doc loan is not the same as a no doc loan; you'll still be asked to show evidence of income and ability to repay. The criteria for what counts as proof, however, is a little less strict.

What do I need to get a low doc loan?

In Australia, most lenders will require that:

1. You're registered with an Australian Business Number and have had it for six (but preferably 12) months.

2. You can provide at least one of the the following: an accountant's letter verifying your income, a business banking statement or a business activity statement.

3. A minimum deposit of 20 per cent of the property's value can be put towards the home.

Together, these show your lender that you have sufficient income to take on the responsibility of a home loan. 

There are a number of other factors your application will be assessed on, such as your credit history, net asset position and the location of the property you're looking to buy. You'll also be assessed on softer criteria, like your familiarity with, and ability to explain, your own financial position. The more ways you can show you're creditworthy, the more likely your application will be approved.

To talk more about a low doc loan and how it might be the right option for you, get in touch with a member of Red Rock's team today.