Low Doc loans have historically been pitched at self- employed borrowers who either hadn’t lodged their tax returns or simply did not wish to supply them. Lenders seeking alternative income verification would rely on an estimate from the borrower of his/her business net profit supported by a letter from their accountant suggesting that estimate was accurate. That form of income reliance is however gradually being replaced due to post Royal Commission “reduced risk appetites” and the need to adhere to more responsible lending guidelines.
Enter the Alt Doc or Near Prime Loans. The very same lenders (with a few exceptions) that once relied on a couple of letters now require your last 6 months BAS statements and or 6-12 months business trading statements and they’re not just looking to calculate your net profit but also so they can identify undisclosed debt and otherwise track your monthly living expenses.
Changes in Low Doc lending are not only confined to income verification but increasingly lenders are trimming their appetite for specialized security and generally lowering the loan value ratio and loan purpose categories they will lend on. Gone are vacant land loans, construction and cash out. Gone too are loans to property developers and land bankers while 80% loan value lends are more likely to mean 65% to 70% in this falling RE market.
Sure, there are still a handful of lenders out there that will overlook the odd missed payment or some minor derogatory credit on your credit file but increasingly lenders in the Alt Doc and Near Prime lending space; think Pepper Money and Liberty; are chasing clients who can support their income with BAS or bank statements but because of their source of income or their total exposure to other loans find themselves locked out of mainstream bank lenders.
Add to the maelstrom of increased scrutiny for self-employed borrowers seeking access to equity in their homes and investment properties or those seeking to get on the property ladder; are increased borrowing costs with most Alt Doc and Near Prime lenders increasing rates as national and international pressures increase wholesale funding costs.
Knowing which lender has an appetite for and interest in funding, is key to getting approval first time. If you’ve been rejected or simply want to discuss your particular funding needs drop us a line or call 1800 801 999. We’re here to help.