A Comprehensive Guide On A Low Doc Construction Loan

A Comprehensive Guide On A Low Doc Construction Loan

Are you planning or thinking of building a new home or renovating the present one with a modern design, but you do not have enough funds to complete your renovation? If you are looking for funds for the home’s construction, then a low doc construction loan is the answer to all your worries. Unlike other loans, there are flexible and easy to take. After this, you must consider how to spend or use the money in construction.

Let’s briefly discuss some of the terms to get more idea about this and utilize this option in your home construction. So, it’s time to build the home of your dream.

What’s Low Doc Construction Loan?

A low doc construction loan can fulfil your financial needs without any hassle. There is no requirement to submit many documents such as income proof, pay slips, and other documents you usually submit while applying for the loans and their approval.

So, mainly the advantage of these loans is that if you are worried about income fluctuations as a business owner, this kind of loan can look like a savior to you. However, some companies or banks might want records of the tax you have fulfilled for the last two years, along with the history of profit and loss. Even a few lenders also want a letter signed by the accountant which supports your financial condition.

In the 90s, the low doc loans were first introduced, for the people who didn’t have any link to banks. They were usually mortgage brokers and used the instrument to gain extra profits. You might have to repay higher interest rates if you want to go for these low-doc construction loans. If you are looking for an unsecured loan then you can search them online.

How To Apply For Low-Doc Loans For Homes?

Due to the Global Financial Crisis, low doc loans for homes have become harder to gain, and the criteria have become stricter and a little tough. Traditional low doc construction loan are unavailable if you don’t have proof of income; therefore, the verification and confirmation of the income are made by other means. If everything is fine and clear, you’ll get the loans for the construction.

How Would You Verify Your Income For A Low Doc Construction Loan?

There are three main choices for lenders to check income other than by using payslips or referrals to tax returns. So, let’s discuss them.

? An accountant’s letter that verifies your income over a regular period: This has no option on the accountant who signed if the loan went into default ever.

? Last 6 months of business trading record: This is to verify the revenue is being produced by the business, with the bank allowing up to 1.4 times the revenue as a declarable source of income.

? Last 12 months of BAS income: This is the most used method for the income verification process. The insurer will only utilize 40% of yearly turnover from BAS statements or income if mortgage insurance is needed.
Knowing how wrong verification could lead to your application declaration is easy. So, try to avoid this type of thing ever.

What About The ‘Documentation’ Part?

We have already discussed that you must fulfill some of the documentation to go for the low doc construction loan. It means you need a self-signed declaration of your income, the registered name of your company or business, your ABN (Australian Business Number), your last year’s Business Activity Statements, and a confirmation of your business registration.

What Is The Minimum Requirement?

Along with the terms mentioned above, you must have a clean credit history record before applying for a loan. Also, you can take up to 80% of the property’s price from the lenders. However, if you want to ignore the Lender’s Mortgage Insurance (LMI), the borrowing limit goes down up to 60% of the total valuation of your property.

What Interest Rates Include In It?

The interest rate for a low doc construction loan can be similar to that of a normal full doc loan. In some cases, lenders charge a higher interest rate, but you can compare their interest rates and other fees to choose an affordable option.


As discussed above, you have to find a lender who will offer a low doc construction loan, and you can hire a broker to get the loan faster.