A low doc loan or low-documentation loan is for someone, generally the self-employed, who has difficulty coming up with the necessary documentation required to apply for a traditional home loan. This may include those with a poor credit history or who don’t work full time.
Low doc loans traditionally have higher rates of interest than traditional loans, as they represent greater risk to the lender. As a result borrowers applying for a low doc loan may be required to secure the loan with assets such as vehicles, homes you own or other investments.
These types of loans generally require a larger deposit than most traditional loans do, with loan to value ratios (LVR) typically ranging from 60 to 80 percent. By comparison, at the time of writing most traditional home loans had an LVR of around 95 percent, meaning just 5 percent deposit is required..
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