How To Get A Low Doc Mortgage For Your Property?

Securing a mortgage can be a challenging process, especially for self-employed individuals or those with irregular income. A low doc mortgage, short for low documentation mortgage, offers a solution for borrowers who may not have the standard proof of income typically required by lenders. This article will guide you through the process of obtaining a low doc mortgage for your property in Australia, using simple and easy-to-understand language.

What is a Low Doc Mortgage?

A low doc mortgage is designed for borrowers who cannot provide the usual income documentation required for a standard mortgage. Instead of traditional proof of income like tax returns or pay slips, low doc mortgages rely on alternative forms of verification, such as business activity statements (BAS), bank statements, or a declaration of income signed by an accountant.

Who Can Benefit from a Low Doc Mortgage?

Low doc mortgages are particularly beneficial for:

• Self-employed individuals
• Small business owners
• Freelancers or contractors
• Investors with complex income structures
• Individuals with irregular or seasonal income

Steps to Secure a Low Doc Mortgage

1. Assess Your Financial Situation

Before applying for a low doc mortgage, evaluate your financial situation. Determine your income, expenses, existing debts, and assets. Lenders will still want to ensure you can manage the loan repayments, so having a clear understanding of your finances is crucial.

2. Gather Alternative Documentation

While low doc mortgages do not require standard income documentation, you will still need to provide alternative forms of proof. Commonly accepted documents include:

• Business Activity Statements (BAS)
• Bank statements showing consistent deposits
• An income declaration signed by a registered accountant
• Tax returns (if available and beneficial)

3. Research Lenders

Different lenders have varying criteria for low doc mortgages. Research multiple lenders to understand their requirements, interest rates, fees, and loan features. Consider consulting a mortgage broker who specializes in low doc mortgages, as they can provide expert advice and access to a wider range of lenders.

4. Improve Your Credit Score

A good credit score is important for any mortgage application, including low doc mortgages. Your credit score reflects your creditworthiness and influences the interest rates and terms offered by lenders. To improve your credit score:

• Pay off existing debts
• Avoid applying for multiple credit accounts
• Ensure all bills are paid on time

5. Save for a Larger Deposit

Lenders may view low doc mortgages as higher risk, so having a larger deposit can strengthen your application. A deposit of at least 20% of the property's value is often recommended, but the more you can save, the better. A larger deposit can also help you secure more favorable loan terms and potentially avoid Lenders Mortgage Insurance (LMI).

6. Apply for Pre-Approval

Obtaining pre-approval before shopping for properties can give you a clear idea of how much you can borrow. Pre-approval is a conditional commitment from a lender that they are willing to lend you a certain amount based on your financial situation and the documentation provided. It strengthens your position as a buyer and speeds up the loan approval process once you find a property.

7. Choose the Right Property

Select a property that fits within your budget and meets the lender's criteria. Conduct thorough research and consider the property's location, condition, and potential for capital growth. Speaking with real estate professionals can also yield insightful information.

8. Submit Your Loan Application

Once you've chosen a property, submit your loan application with the necessary documentation. The lender will assess your financial situation, credit history, and the value of the property. They may also conduct a property valuation to determine its current market value.

Tips for a Successful Low Doc Mortgage Application

1. Maintain Stable Business Income: Lenders prefer applicants with consistent and stable business income, even if it's irregular.
2. Keep Financial Records Organized: Having well-organized financial records can expedite the application process and demonstrate your financial responsibility.
3. Limit Additional Debt: Minimize new debt in the months leading up to your loan application to improve your credit profile.
4. Consult a Mortgage Broker: A mortgage broker can offer personalized advice and access to a wide range of low doc mortgage products, increasing your chances of finding the best deal.

Advantages of a Low Doc Mortgage

1. Flexibility: Low doc mortgages offer flexibility in proving income, making them accessible to a wider range of borrowers.
2. Faster Approval: With fewer documentation requirements, the approval process can be quicker compared to standard mortgages.
3. Access to Property Market: Low doc mortgages enable self-employed individuals and those with irregular income to enter the property market.

Disadvantages of a Low Doc Mortgage

1. Higher Interest Rates: Low doc mortgages often come with higher interest rates due to the perceived higher risk by lenders.
2. Lenders Mortgage Insurance (LMI): If your deposit is less than 20%, you may need to pay LMI, which can add to the overall cost of the loan.
3. Stricter Eligibility Criteria: While low doc mortgages are designed for borrowers with non-standard income, lenders may still have stricter eligibility criteria to mitigate risk.

A low doc mortgage can be a valuable option for self-employed individuals, small business owners, and others with non-traditional income sources. By understanding the process, gathering the necessary documentation, and working with the right lenders, you can secure a low doc mortgage for your property in Australia. With careful planning and preparation, you can achieve your goal of property ownership and financial stability. Loans and Mortgages are the best Mortgage broker firm in Australia specializing in approaching financial services. We offer our services in Hobart, Launceston, Burnie, Devonport, George Town, Penguin, Smithton and near by areas of Tasmania. Our services are also extended all over Australia. For more details call us on 0403 803 470.