Non-bank lenders such as Mortgage House pioneered the low doc loan in the 1990s. For several decades, small business owners, contractors, and freelancers found it difficult to become homeowners through a traditional mortgage. To figure out how much you can borrow as a low doc loan applicant, we offer a few key points.
Low Doc Loan Parameters
A traditional mortgage requires a 20% down payment and full financial documentation including bank statements, payslips, and employment confirmation. The low doc mortgage makes an exception on the documents.
Lenders verify every mortgage applicant’s ability to repay the debt. Check out our mortgage repayment calculator. If savings history and employment aren’t available, lenders request alternative pieces of information. Instead, there are trade-offs. For example, some lenders request a deposit above 20%.
The average low doc mortgage covers 60% of the property’s appraised value. Lenders may approve 80% of the appraised property’s value for applicants who provide a high deposit or collateral. If the applicant procures a signator, it improves their position. A lender may approve 90% of the property’s value.
Low Doc Loan Interest Rate
The low doc mortgage carries more risk. Therefore the lender includes a higher interest rate in their offer. When the average interest rate is 3% for a traditional mortgage, the low doc loan can carry a 5% interest rate.
Low Doc Loan Conclusion
The low doc loan helps self-employed individuals become homeowners. It also helps small business owners and others who cannot provide full financial documentation. For more information, contact our loan specialists at Mortgage House.
