Low-doc loans - how easy to get?

[wylie]

I'm curious to know the situation with low-doc loans right now. I'm told I will be getting a loan 80% of valuation at 4.7% fixed for one year, low-doc. We are just waiting on a credit check and a valuation before formal approval and docs issued.

I have read here that these loans are not easy to get, but if I am getting one, I'm curious to know how easy it is to get one. Or was I just lucky?

I believe I'm able to get this as I have an ABN and the house I'm buying brings its own rental income. Other than that I earn about $20K as a PPT employee (10 hours per week base). I believe my loan will be $560K(ish).

I've not seen the application so am unsure if our other assets are in any way influencing this approval.

I thought I'd put this post up in case there are people who believe on a low income they cannot get finance. I know it is not that simple, but I was told by a bank lender that it would be very hard to get through, but there was a small chance he could swing it, to a pretty much flat out "not possible" from a broker.

We've got this organised through the broker we've used before and it seemed fairly easy.

 

[NPB]

I'm curious to know the situation with low-doc loans right now. I'm told I will be getting a loan 80% of valuation at 4.7% fixed for one year, low-doc. We are just waiting on a credit check and a valuation before formal approval and docs issued.

I have read here that these loans are not easy to get, but if I am getting one, I'm curious to know how easy it is to get one. Or was I just lucky?

I believe I'm able to get this as I have an ABN and the house I'm buying brings its own rental income. Other than that I earn about $20K as a PPT employee (10 hours per week base). I believe my loan will be $560K(ish).

I've not seen the application so am unsure if our other assets are in any way influencing this approval.

I thought I'd put this post up in case there are people who believe on a low income they cannot get finance. I know it is not that simple, but I was told by a bank lender that it would be very hard to get through, but there was a small chance he could swing it, to a pretty much flat out "not possible" from a broker.

We've got this organised through the broker we've used before and it seemed fairly easy.

haha what is on the low doc declaration of income, tipping it was a lot higher than $20k!

 

[Brady]

$20k declared income borrowing $560k... I'm sure there is more to this.

 

[Jess Peletier]

I've not seen the application so am unsure if our other assets are in any way influencing this approval.

Bet you $5 they are.

I would definitely ask to see the application - just for interest's sake.

 

[Peter_Tersteeg]

Are you aware of what the repayments will be. Have you realistically done a budget taking into account all the holding costs of the property? Can you really afford this?

It sounds like there's a lot more to this application that's been described. There might be some funny business going on. At the end of the day, you need to be confident you can actually afford the loan.

I'd be asking for a copy of the application.

 

[wylie]

haha what as on the low doc declaration of income, tipping it was a lot higher than $20k!

$20k declared income borrowing $560k... I'm sure there is more to this.

Bet you $5 they are.

I would definitely ask to see the application - just for interest's sake.

Are you aware of what the repayments will be. Have you realistically done a budget taking into account all the holding costs of the property? Can you really afford this?

It sounds like there's a lot more to this application that's been described. There might be some funny business going on. At the end of the day, you need to be confident you can actually afford the loan.

I'd be asking for a copy of the application.

No funny business. Highly regarded broker, knows his stuff, have never known him to fudge any figures, ever.

I'm guessing our asset base comes into play, but haven't seen the application. With a bank lender saying "maybe but difficult" and another broker pretty much saying nobody will lend low-doc I just wondered if low-doc loans are easy to get or not.

We can well afford the loan. The rent more than covers the loan. My thought was that it was my low income that might have made it hard.

I've always liked that this broker seems to be in the "let's see how we can make it work" camp rather than the "that sounds too hard" camp.

When I say I don't have much income, that is because everything is in hubby's name, so I'm guessing very much that our total asset base is coming into play here. I'm just curious really.

 

[Terry_w]

What did the declaration you signed state? Hope you know!

 

[wylie]

What did the declaration you signed state? Hope you know!

Pretty much that if I default, they take the house and sell it up to clear the debt.

 

[Terry_w]

Pretty much that if I default, they take the house and sell it up to clear the debt.

I meant the income declaration.

 

[Shahin_Afarin]

The broker can't fudge the numbers because its normally the accountant that needs to sign off on the income declaration.

 

[Rolf Latham]

Practice Audit..............

so we stay away from them, and havent done one since Pre gfc i think

its rare that a full doc cant be put together if there is real income there

there are times with clients that do a fair bit of capital gain lumpy stuff where a lo doc may be amenable

ta

rolf

 

[tobe]

One thing is certain, your other assets definitely wont influence the approval. Lenders have to show you have enough income to service the loan. Perhaps in this case, your other assets give enough rent to service the loan?

Some lo doc providers let property investors declare their rental income, this may be how its getting done.

As the others have said, get a copy of your application, if this person is such a good broker, you wouldn't need to ask I reckon.

 

[Terry_w]

so we stay away from them, and havent done one since Pre gfc i think

I haven't done one since the NCCP came in 2009. Too much of a fraud risk.

 

[wylie]

One thing is certain, your other assets definitely wont influence the approval. Lenders have to show you have enough income to service the loan. Perhaps in this case, your other assets give enough rent to service the loan?

Some lo doc providers let property investors declare their rental income, this may be how its getting done.

As the others have said, get a copy of your application, if this person is such a good broker, you wouldn't need to ask I reckon.

I will get a copy, early days just now. I've known this broker for over 30 years, he is not dodgy in any way.

I do believe the fact that the rent more than covers the loan must be part of the reason this was approved (well, not yet, waiting on a valuation). I also have distributions from a family trust, so whilst my "official" income is low, I have other income.

My understanding is that the rental income from the house being purchased is the "income" which, together with my PPT work and distributions is getting me over the line.

It still wasn't enough for the bank lender and the other broker, who both said my low PPT income was what would be looked at, even though I have other income, and both made it sound like I would be pushing things to get approval.

One wanted me to join my son into the loan at 1% and use his income too. I asked "Wouldnt that mean when he wants another loan my debt will colour his application?" Answer was "yes". If I know that, why wouldn't a broker know it, or suggest that the upside to me of adding my son to the loan is a huge downside for him for many years to come?

 

[Brady]

Distribution from a trust is income, it's offical income declared on a tax return.

 

[wylie]

Distribution from a trust is income, it's offical income declared on a tax return.

Absolutely, but the first two brokers still didn't think I could get a loan easily, if at all. Perhaps they just didn't want to touch a low-doc?

 

[Terry_w]

Distribution from a trust is income, it's offical income declared on a tax return.

A disstribution could also be capital which is not income.

 

[wylie]

A disstribution could also be capital which is not income.

We pay tax on distribution of earnings but not on any capital drawn (ie we pay tax where we have to). Luckily my brother knows the difference or I would be lost.

 

[Brady]

I'm struggling to see why this would need to be a low-doc? Unless there is figures that aren't correct being used.

$20k PAYG income, rental income, dist from trust. All these could be used with a full-doc loan. Are you a trustee of the trust?

 

[wylie]

I'm struggling to see why this would need to be a low-doc? Unless there is figures that aren't correct being used.

$20k PAYG income, rental income, dist from trust. All these could be used with a full-doc loan. Are you a trustee of the trust?

I struggled too . One "almost no, slight maybe" came from NAB mobile banker, so he only had NAB loans to choose from.

The other "maybe but very difficult" came from a broker with access to other banks.

In the eyes of a bank, I own half our PPOR. Hubby has everything else in his name, income comes to him, loans in his name. He has not worked for several years, otherwise he could probably guarantee me, or something. We have plenty of assets, plenty of income, large loan, but plenty of super. I struggle to work out why we seem to be such a big risk.

With the trust, perhaps they realise that I could choose not to take any distribution of rents from houses held in the trust? I don't know. I turn 55 this month, hubby 56.

I am bemused at how many people think there are rubbery figures being used :roll eyes:.

Perhaps both banker and first broker just got it completely wrong. Our broker has chosen a low-doc loan for reasons that I have faith in. Clearly, he would put us into a regular loan if he could.