For many self-employed borrowers, getting a home loan can be tricky without traditional financial documents like payslips or full tax returns. Low-doc (low documentation) loans offer an alternative by allowing income verification through other types of financial evidence.
Instead of full financial statements, lenders usually accept business activity statements (BAS), bank statements, and declarations from accountants to evaluate the borrower’s ability to repay. These loans often come with stricter conditions, such as higher deposit requirements—usually at least 20%—and possibly higher interest rates to balance the lender’s risk.
When might a low-doc loan be suitable?
Low-doc loans aren’t the first option for most borrowers but can be helpful in situations like:
- Recent self-employed individuals who haven’t yet filed two years of tax returns but have steady income.
- Business owners with irregular income that doesn’t fit standard loan assessment criteria.
- Those who reduce taxable income for tax purposes, making usual income proof difficult.
- Investors needing quick finance without up-to-date financial documents.
Credit and deposit factors
There isn’t a fixed minimum credit score for low-doc loans. Lenders assess risk on a case-by-case basis. A strong credit history improves the chances of better loan terms, but deposit size and overall financial stability are also important. Generally, a larger deposit—often between 20% and 30%—is needed compared to regular home loans.
Taking steps like paying bills on time, reducing outstanding debts, and avoiding unnecessary credit applications can strengthen credit profiles. Checking credit reports for accuracy also helps.
Finding the right loan
Low-doc loans are mainly available through lenders that specialise in working with self-employed borrowers. Because of higher interest rates and fees, they should be considered when other options aren’t available. Since requirements vary between lenders, it’s important to explore different options.
If you’re self-employed and want to know more about low-doc loans or other pathways to home ownership, contact Mortgage Suite Baldivis for advice tailored to your circumstances.
