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Lending Requirements for Low Doc Home Loans
It is worth taking a quick look at how low doc home loan lending in Australia has been affected by recent economic turbulance.
Firstly, it should be understood that In comparison to some other countries, Australian lending rules are relatively strict and have not led to anywhere near the type of lending problems experienced elsewhere.
As a result, it is still possible to obtain low doc home loans, although lending requirements - especially the loan amount as a percentage of the value of the security property (LVR, or Loan Value Ratio) - have been tightened.
Do You Qualify for a Low Doc Hom Loan
Low doc home loans are primarily intended for self employed people who have difficulty in providing formal income verification.
Whether or not you qualify for a low doc home loan depends upon individual circumstances. Generally, successful applicants will have a cash deposit, or equity in an existing property as well as the financial means to make loan repayments.
There are also various other lending criteria taken into consideration when assessing an application.
To see if you qualify for a Low Doc home Loan without any further obligation, email or call us today
Loan Value Ratio Requirements (LVR)
The Loan Value Ratio, or LVR, is the ratio of the loan amount to the market value of the property being financed. Whereas it was previously possible to obtain a low doc home loan with an LVR of 90%, it is now generally not possible to obtain a low-doc home loan where the amount of the home loan will exceed 80% of the value of the security property.
Although it is possible to obtain a low doc home loan with interest rates comparable to standard home loans, generally speaking the higher LVR gets, the higher interest rates, LMI and associated fees will be, reflecting lenders' additional risk.
Other Lending Requirements
Some major home loan lenders now also require BAS statements where the LVR is between than 60% and 80%. Most major lenders require the applicant to have been trading for at least two years, although specific requirements vary between lenders.
Lenders Mortgage Insurance (LMI)
A major difference between low-doc loans and fully verified loans is LMI. For normal, fully verified loans, LMI is usually required where the loan value is above 80% of the market value of the property whereas for low-doc loans, LMI is normally required at 60%. Low doc LMI rates start at around 0.3% and range up to 1.00% at 80%.
Is there a limit to how much that can be borrowed?
Mainstream banks generally won't lend more than $2.5 million through a low doc home loan, but it may be possible to borrow more from specialist non conforming lenders at interest rates comparable to that offered by mainstream banks and lenders.
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