These loans are different to a traditional full doc ("fully documented") loan, which the majority of borrowers have. The difference between a low doc and full doc loan, is the level and type of income verification which is completed.
Self-employed applicants are usually required to provided personal and company tax returns, covering the last two financial years. With documents, the borrower would be able to apply for a full doc home loan.
Often many self-employed borrowers have not completed their most recent tax return. To compensate for this, some lenders offer low doc home loans. Allowing the borrower to provide a reduced to lower level of documentation, to verify their earnings.
Under a low doc home loan, the borrower may have to provide recent BAS statements, a letter from their accountant or provide a declaration of their earnings.
If you have previously had a low doc loan, you might be thinking the process has change. After the introduction of National consumer credit regulations in 2009, lenders had to alter their policy and process for low doc loans. Today, regulation states a lender must not provide finance to a customer unless they have met responsible lending obligations.
If you would like to speak to someone about a low doc home loan, our team of mortgage brokers are here to help.