Low doc and non-conforming loans
Not everyone is a typical PAYG employee, and if you are self-employed or your circumstances are out of the ordinary, there may be options available to help you into your first home
When you apply for your first home loan, lenders want to see evidence of your income – and for many people, providing pay slips and Group Certificates is an easy way to do this.
But what if you’re self-employed? The good news is that if you run your own show, or your circumstances are a bit out of the ordinary, it can still be possible to buy a home using a low doc or non-conforming loan.
What are low doc loans?
Low doc loans are
Loans for self-employed/sole-traders
If you are self-employed or a sole trader, it is important to have all your financial records up to date. When that’s the case, applying for a home loan doesn’t have to be considerably different from any other home loan application.
Lenders typically want to see your last one to two years of personal and business tax returns and income tax assessments. That’s because your declared taxable income, not gross turnover, will likely be used to determine how much you can borrow.
A low doc loan can still help if you don’t have up to date records available to show a lender. Some lenders may be happy for you to self-certify your income. It means signing a certification (and possibly having confirmation from your accountant) to say that your income is sufficient to meet your home loan repayments.
You may still need to provide some paperwork, and while the requirements differ between lenders, as a general rule, you may be asked to provide things like:
- Your Australian Business Number (ABN),
- Evidence that you’ve been self-employed in the same industry for at least 12 months,
- Your latest Business Activity Statements (BAS) verified by the Australian Tax Office (ATO), and
- Several months’ worth of bank account statements.
The downsides of low doc loans
The availability of low doc loans varies – not all lenders offer them. And among those that do, you may find you need to provide a larger deposit or pay a higher interest rate. Chat to an Aussie Broker about what will be right for you.
Non-conforming home loans
Non-conforming home loans are pitched at home buyers who have a few dents in their credit record – or even no credit record at all, which may be the case if you’re a new arrival to Australia or never applied for any credit.
Non-conforming loans can come with a higher interest rate than regular home loans. However, after establishing a healthy record of loan repayments you may be eligible for a lower rate with the same lender, or by refinancing to a new lender further down the track.
The main point is that even if you don’t fit the picture of a ‘typical’ first home buyer, don’t give up your dreams of buying a place of your own. Your Aussie Broker may be able to suggest a variety of different strategies to help you get started on the property ladder.
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- Chapter One : Getting started
- Chapter Two : Your dream home
- Chapter Three : Money matters
- Chapter Four : Ways to purchase
- Chapter Five : Understanding interest rates
- Chapter Six : Understanding home loans
- Chapter Seven : Lending sources
- Chapter Eight : Getting your loan
- Chapter Nine : Choosing a home
- Chapter Ten : Steps to settlement