Six months ago it was much easier for a self employed person to get a low doc loan, but try getting one today and you will find it much more difficult. The following is a basic description behind the logic that has made low doc loans hard for Melbourne mortgage brokers or any mortgage broker in Australia to place.
As most people would have heard to some degree in the last year or so, we have been going through a credit crisis in Australia as well as the rest of the world. Similar to The USA, our banks and other lenders for the past few years have been very flexible on their credit criterea that decides elligibility for a loan. For a lender it is all about the risk involved in lending money; this is also what dictates the rate of interest you will be charged. For the past number of years lending criteria has been quite relaxed, where banks have been offering loans based on relaxed credit criteria.
However, this bubble has now burst. Alot of people in the USA have struggled to repay their loans and the banks and other lenders have lost money as a result. The overflow has carried on the Australia resulting in much tighter lending policies. This in effect has made Lenders more cautious who they will lend money to over the recent months.
As a mortgage broker in Melbourne, I have realised that the Low Doc or self employed category of mortgages has become one of the more difficult to place. in difficult economic times like we seem to be entering, the likelyhood of small to medium businesses not surviving also increases. Therefore, this category of loan is seen as one of the more risky for the lending institutions and the inverstors who provide the funds.
Where there is a need, a lender will provide a product. It simply means the product will become increasingly more expensive, and the criteria to obtain a low doc loan will be much more restruictive. By doing this Lenders and Investors also limit the overall risk with lending low doc funds.
There are however ways to improve your chance of getting approval for a low doc loan. Keeping thorough accounting records is the first tep to proving you have a solid business that the banks will consider safe enough to lend to. Other factors they consider is your annual turnover, fixed costs and the length of time you have been in business for.
If you need this a loan like this, talk to Loan Saver Network or your mortgage broker.
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