With credit becoming more and more available, low-doc options have begun becoming more common but you may find yourself wondering, is it really something you need? How factual is the information out there that pertains to low doc loans? In this article, we will look at the most common myths surrounding low doc loans and separate truth from mere here say.
Myth #1-Low doc loans are more expensive than traditional loans.
This is not necessarily true. Low doc loans are usually offered at the same rate as traditional loans. The only difference between the two is the documentation needed to access said loans. This means that if you are looking to get a low doc commercial loan or mortgage loan, you would only be required to provide proof of income and an accountant's letter which is not the case with a traditional loan.
Myth #2-Low doc loans do not require any financial documents.
It is a common misconception that you do not require any paperwork to access a low doc loan which is not the case. The thing is you do not need a lot of documentation but you do need an application form and to disclose your assets as well as liabilities. A recent credit account statement is also required. Remember, low doc does not mean ‘no doc’.
Myth #3-Self-employed people can't borrow as much
Some people assume that you cannot be able to get the same amount as you would have gotten if you were employed. This is not true. Some institutions allow you to borrow as much as $2.5 million which is pretty substantial.
Myth #4-The interest rate is all that matters.
This is a common myth when it comes to private mortgage loans. However, it should be noted that a private loan is not just about interest rates. There are usually establishment fees and exit fees when time comes to refinance. The thing about private loans is that you need to do your research and view this website before you settle for a private mortgage loan so that you can find the loan that works best for you. Don't just base your decision on the interest rates. You should also consider if you can get a provision to make additional repayments, redraw or access the money you have already paid.
Myth #5-Self-employed people cannot get a normal home loan.
This is one of the most common myths out there, the fact that all self-employed people always have to go the low doc loan route. This is not at all true. If you have an established business with a reliable stream of income, then you more than qualify for a traditional loan rather than a low doc mortgage loan. All you need is your last few years of tax returns, your bank statements and a business activity statement (BAS).
Myth #6-You can only access small amounts with a low doc loan
Definitely not true. There are several lenders who can provide loans of even a million dollars. Actually, you can access loans of up to $2.5 million when you got the low doc route.
Myth #7- You cannot get a loan if you have bad credit.
Again, not true. Usually, people with bad credit cannot access loans and the process can get frustrating. Luckily however there are institutions who specialise in bad credit home loans who can really help those with bad credit have a good chance at accessing a home loan, find out more.
Finally, with all the myths debunked, you now know what is real and what is not and I believe that you are in a better position to make an informed decisions in case you want to take a low doc loan.