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Lo doc no more

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Nila Sweeney

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.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

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