You may have a dream to build your own house, but you cannot do it without a home loan. The financial crisis is one of the primary concerns that forces individuals to discard the dream of owning a home.
It is mainly difficult for self-employed individuals and people working in the unorganized sector or working as freelancers. They cannot furnish all the required documents needed by most of the banks and lenders.
However, the ground reality is not as bad as it looks. Many financial institutions offer low doc home loans, and one can approach these institutions to borrow money to build or purchase a house or apartment.
However, before applying and taking this type of loan, one should know a bit about them.
The Type of Loan:
As the name suggests, low doc home loans are credits given by some of the best financial institutions to persons having less supporting income documents or collaterals. There is minimum paperwork and less documentation.
This type of loan is most suitable for contractual workers, self-employed professionals, casual employees, and freelancers. Often, they do not have proper tax returns and they cannot apply for a home loan with pending taxes.
Their income is also not steady throughout the year, but they earn a substantial amount over a period. So how would you prove your income? In this case, you can provide your bank statement to prove your income and you can get a letter from your accountant for the same.
The Amount That Can Be Borrowed
Different finical institutions have various schemes for giving loans. While one institution provides 90% value of the property as a loan with high interest, some others allow borrowing 80% of the property value with a risk fee attached to it. The interest rates are also competitive.
Again, one can also borrow an amount of 60% of the property value. The rate of interest in this category is standard. It is better to check your eligibility before you apply for a low doc home loan, and you can discuss your requirements with a lender in this regard.
How Would you Get a Low Doc Home Loan?
Numerous financial institutions are offering low doc home loans. One can search such lenders online to choose the best deal for their home. However, before application, one should keep some papers ready to upload.
In addition, one must submit a bank statement for a particular period.
A letter from an accountant certifies the borrower’s financial status, ABN for about two years, GST registration number, if any, and some proof of collateral is often required to get these loans. You can keep these documents ready, and you can upload the same on the official website of a lender.
Most of the lenders can give you instant approval and you will get a confirmation letter soon. You can show this letter to their office for further proceedings.
Many financial institutions can also ask for LMI or the Lenders Mortgage Insurance if the loan amount is more than 60% of the property’s value. Fudging the documents to get this type of loan can invite tax troubles in the future.
Therefore, one should always put forward the correct statements before signing the agreement.
If you have a good credit score, then you can get a home loan with less interest rate. It is always better to consult an expert before applying for these loans and clear all the doubts. One should always gauge the pros and cons before they apply for low doc home loans.
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Conclusion
Although low doc home loans have more interest than traditional home loans, they are one of the avenues for many to meet their financial need while purchasing a house or apartment.
One should apply for them only if they cannot get traditional home loans and avoid paying hefty interest or the risk fee.