Low-documentation or low-doc loans are for people – generally the self-employed – who have difficulty getting the documentation together that is required to get a traditional home loan. Low-doc loans differ from another relatively new loan in the marketplace that is also gaining popularity – non-conforming loans
A low doc (or low documentation) home loan is a type of home loan that can be approved without the normal income verification requirements.What this usually means is that you sign an income declaration and your bank will accept this as proof of your income without the need to see your tax returns and other financials.
Pros — What’s good about a low doc home loan?
-Great if you’re self-employed. You can get a home loan if you’re self-employed, and your income varies from year to year, or you’ve only just gone into business.
-Flexibility. You can get fixed rate, variable rate and line of credit low doc home loans.
Cons — What’s bad about a low doc home loan?
Higher interest rate. Initially, the interest rate on a low doc home loan is generally higher than that of a standard variable or fixed rate home loan. After you’ve made your repayments on time for a few years, the interest rate is normally reduced.