There are many factors that can prevent you from getting a low doc loan. Those can include poor credit history and not meeting the requirements of the lender. That can surprise many borrowers because there is the presumption that low-documentation loans are easy to obtain. While they can be, it depends on your circumstances and finances.
So, what can stop you from getting a low-documentation loan?
You Don’t Earn Enough Money
A low documentation loan is built for those who don’t have traditional paperwork or a regular 9-to-5 job. So, it’s easy to believe you can get a low doc home loan without too much trouble. Unfortunately, that’s not quite true. One of the biggest reasons that can prevent you from getting a low documentation loan is down to money – specifically what you earn. For instance, you want to borrow a substantial amount – $40,000. Unfortunately, you earn below what the lender requires you to.
Remember, lenders need to be assured you can afford the monthly payments. For instance, if you earn (estimated) $800 a month and the loan repayment is around $750, that’s a red flag for the lender. The reason is because you aren’t earning enough to afford monthly payments. A low doc home loan lender needs to know you have sufficient funds to support yourself and pay back what’s owed.
Your Credit Doesn’t Meet the Requirements of the Lender
There are misconceptions surrounding credit and low doc loans. Many borrowers believe lenders don’t care about credit scores or credit history; unfortunately, that’s not true. Most lenders take a very close look at your credit score and history. The reason is simply because the lender needs to know what sort of risk you are. This might prevent you from getting a low doc loan. Click here to read about Should You Apply for a Low Doc Home Loan?
For instance, great credit scores with a stellar credit history can make lenders a little less nervous. You have a good history and are less likely to default on the loan. On the other hand, you have very poor credit. You have defaulted on every loan in the past, so you’re unlikely to get approval. Whether you’re looking for a personal loan or a low doc home loan, your credit matters. If your credit doesn’t meet the requirements of the lender, then you may not get the loan.
The Property Isn’t Suitable for a Low Doc Home Loan
Some properties are not suited for a low documentation loan. There could be a number of reasons for this, such as the location of the property. Unfortunately, if you intend to buy one of these properties, you might be prevented from obtaining a low doc loan. It means you’re back to the drawing stage because it’s unlikely lenders will offer a low documentation loan. So, it’s one major factor to think of before applying for a loan. Visit https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure to read about Homeownership and housing tenure.
Get in the Know Before You Apply for a Loan
There are many things that can stop you from getting a low documentation loan, including an unsuitable property, not earning enough, and not having sufficient credit. Fortunately, there are ways to overcome these. For instance, by researching a lender’s criteria and by sorting out your credit. These things can go a long way in making your low doc home loan application more successful.