Low doc home loans are specially designed for the people who are not entitled to claim traditional loans for buying a property. A person with an impaired history is unable to avail regular loans from financial lenders. Their deferred history acts as an obstacle in availing loans. However, the low doc or loans with low documentation provide such borrowers with a unique opportunity.
There are numerous lenders in the market that offer low doc home loans at present. Low doc home loans could be easily divided into three categories, namely:
- Self declared: This is the most common low doc loan, where a lender offers a loan on a signed declaration of income statement by the applicant, involving no other documents as evidence.
- Account statement: It requires more substantial documentation evidence than the former but the rate of interest match up to the standard loans in the market.
- Asset lend: This type of home loans are offered with absolutely no requirement of signed declaration from the applicant. It is secured purely on the basis of value of property.
People who can benefit from the low doc home loans include:
- Self employed
- Casual workers
- Businessmen with impaired credit history
The best feature of the low doc loans is that the borrower gains access to a range of loan features and options that were previously unheard of or unavailable. There is an increasing range of low doc products in the market where lenders offer such loans with the choice of fixed or variable interest rates.
What’s the procedure involved?
The best feature of a low doc home loan is that the applicant is not required to submit detailed paperwork which is otherwise mandatory in the case of regular loans offered by different banking bodies. The procedure is completely hassle-free and it works on the universally followed method of self verification i.e. the loan seeking candidate is required to declare his active source of income. Thereafter, the lenders decide if the applicant’s proposal is worth acceptance or not.
Basic guidelines that one should consider:
- The applicant should ensure that he is using his bank account regularly. This is very useful in putting across the point to the lenders that the candidate has an active source of income despite the fact that he has an impaired credit history.
- Loan seekers should avoid cash jobs as non-declared income and expenses could spell trouble for him. It could severely distort the true health of his business and lead to difficulties in acquiring the much required loan.
- Lastly he should make sure that the bank trading account for the business is never overdrawn. He should not be involved in any case of cheque dishonor in the past.
Low doc home loans can no doubt be the best possible solution for any person with bad credit history.
However, failure to declare taxable income and possession of low doc home loans on the basis of forged documents is a declared offense and invites strict penalties.
Author Box– Andrew Cowan is a specialist mortgage finance consultant of Red Rock Mortgage Group, an independent mortgage finance company specializing in property finance solutions for investors & borrowers with specialized lending needs