Question: I have been reading conflicting reports about how easy or difficult it is to get a lo doc home loans since the whole credit crisis hit. Are lo doc loans really a thing of the past and where does that leave borrowers who are self-employed or don’t have a regular income?
Answer: It is true that during the past six to 12 months “lo doc” home loans have become extremely difficult to get and have evolved into a version of a full-doc home loan with a few less requirements. Up until the global credit crisis all you needed to qualify for a lo doc loan was an ABN for two years and GST registration and you could pretty much self-declare your income and qualify for a mortgage. Now most lenders will ask to see your four last BAS statements and then as a general rule, will accept 40% of your turnover as assessable income.
There are some exceptions. For example, you could provide earlier tax returns as proof that your business expenses are only, for example, 10% of turnover, so the lender would take more than 40% into consideration when assessing your application. At State Custodians we will still provide lo doc loans without BAS statements for purchases but it is now extremely difficult to refinance a lo doc loan without evidence of high business turnover so don’t assume that it will be easy to refinance if you’re self-employed and managed to get a loan a couple of years ago. Investors also need to remember that rent is not included on BAS statement turnover. If you are self-employed and haven’t done your financials make sure they are up to date before you start looking for a home loan and get full loan approval before you start looking for properties. Life is not as easy as it was a few years ago for some borrowers.
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