Blueconsultants.com is your new free blog, REGISTER FOR FREE!





Family house
Family house

A Simple Insight Into Low Doc Loans for Those With Bad Credit

In your loan preparation, you have discovered that you have poor credit history. Or perhaps, you are unemployed. Or, your bank requires documentation you simply cannot provide for objective reasons. So, what are your options? If you do not get a loan, your dream house will remain just a dream... Or will it? Don’t despair, there is still something you can try.

What is a Low Doc Loan?

Low documentation loan is a type of mortgage loan where the borrower doesn’t need to provide proof of income such as financial statements or tax returns. This type of home loan is usually designed to meet the needs of self-employed individuals and small business owners, who often encounter difficulty showing proof of a higher level of income due to numerous factors such as ploughing back of profits, writing off on-going business expenses and being slow in lodging tax returns. Unlike conventional loans, low doc loans offer fewer hurdles and more flexible terms, making it easier for the self-employed to get mortgage loans and acquire homes.

Who Is It For?

Generally, people with limited credit histories and the self employed are considered to be riskier borrowers. As a result, many of the larger, traditional lenders such as banks may not extend mortgage loans to these groups of people. This is where low doc loans come in. A number of financial institutions provide residential mortgage loans - low doc home loan solutions - to borrowers who don’t meet the strict standards of traditional lenders. In these home loans, applicants are not required to provide very much information on the paperwork. This typically makes the loan application process faster and easier.

What Do I Need to Provide?

In a basic low doc home loan, the applicant provides information about his or her income and the bank determines whether to extend the low doc loan on several factors, including loan-to-value ratio. Even though most lenders usually check the applicant’s credit score to determine risk, low doc home loans are available even for individuals with imperfect credit. Some lenders also provide low doc loan refinancing. Traditionally, low doc loans charged much higher interest than conventional loans. But the increased popularity of these loans has meant that lenders are willing to offer them at the same rate as mainstream home loans.

Types & Options

There are four basic types of low doc loans: standard variable rate, fixed rate, base variable rate home loan and line of credit. The variable rate low doc loan allows the borrower to take advantage of current economic climate to pay a lower rate of interest on mortgage loan. But it can be risky as the borrower may be forced to pay much more in interest when the average rate of interest climbs. With a fixed rate low doc home loan, the interest rate remains constant for the life of the loan, allowing the borrower to plan ahead. Many lenders also allow borrowers to take an equity loan or line of credit based on the money they have already put into a low doc mortgage program.

How to Apply

The low doc home loan application process is very easy. Individuals wishing to get a low doc loan will typically need to satisfy only three requirements: self certification (or state their income without giving proof), provide proof of self employment – registered ABN/certificate of incorporation or an accountant’s letter and have good credit. But the loan’s terms and conditions can vary from one provider to another. Despite poor credit, people will be approved for the loan, provided they have no other mortgare in arrears and can provide reasonable explanation for defaults.

 

Blueconsultants.com is your new free blog, REGISTER FOR FREE!