The rundown on low documentation loans

If you're considering your self employed home loan options, it could be worth investigating the availability of low documentation loans to help you to achieve your real estate goals.

Being self employed can make the home loan process complicated, with so much of a lender's decision based on the regularity of your paycheck and, in turn, your ability to make sustained, regular repayments.

This can cause problems for those who may not have a fixed income, or one that fluctuates between months, as can often be the case for self-employed individuals.

There are options available for self employed home loans, with one of the main ones in Australia being the low documentation loan. These work in much the same way as a regular home loan, except that the amount of paperwork required to apply for one is less.

Because of the reduced number of financial statements available, often lenders will ask potential borrowers to prove that they are receiving enough income for each period to make repayments, as well as evidence of employment – usually an Australian Business Number or a letter from their accountant.

Naturally, the more documentation you can provide a lender, the more willing they will be to lend higher amounts for your home loan.

Furthermore, keep in mind that the interest rates on these loans are often higher than normal, due to the increased risk associated with lending without the usual amount of financial security.

The required deposit is generally higher, with many lenders asking for a minimum of 20 per cent, as well as insisting on compulsory Lender's Mortgage Insurance (LMI).