For the self-employed or full-time investors, a Lo Doc (or Low Doc) loan typically does not require traditional proof of income such as company financials or tax returns.
Instead Lo Doc loans usually need to be supported by the borrower completing a declaration that confirms they can afford the loan. This is known as self-certification.
These loans are particularly attractive to self-employed or full-time investors who may have difficulty showing a high level of income that is normally provided with a ‘full-doc’ loan.
A key component of a Lo Doc loan may be an LMI premium. LMI (or Lenders Mortgage Insurance) protects the lender against any loss should you default on the loan. While traditional loans may require LMI if you are borrowing more than 80% of the property’s value, a Lo Doc loan often requires LMI on lower loan to value ratios.
To qualify for a Lo Doc loan, you will usually have to meet the following criteria as a minimum: