21 Mar 2022

Are Low Doc Loans Safe?

Full Doc Loan

Lenders seek to minimise risk when funding the purchase of homes, construction projects, and commercial properties. The application process for all property loans takes between four weeks to three months. Lending teams must verify the applicant’s ability to repay their mortgage in full and on time. 

Therefore, lenders work to make low doc loans safe for borrowers. Banks remain conservative in their lending practices to ensure that they do not issue losing propositions. Although they can recoup losses through property and land, they prefer not to take these routes.

To make mortgages safe, lenders ensure that only qualified applicants receive funding to purchase their homes. Homebuyers play a role in the process. When they place a 20% deposit, it lowers the total outstanding mortgage. In turn, they lower their monthly repayments. 

In addition, lenders apply several ratios to find the best loan terms per applicant. For example, lenders such as Mortgage House look at net disposable income, minimum living expenses, and net servicing ratios. Our loan specialists also apply buffering ratios to the applicant’s finances as a stress test. The Australian government recently raised the buffering percentage to help lenders make better lending choices. 

Mortgage House also offers several online resources to help homebuyers prepare for the home loan application process. We encourage our clients to use our home loan calculator. It’s free and available online. 

Low Doc Loans Safe Conclusion

All mortgages have a degree of risk. Mortgage House is among the lenders that make low doc loans safe.

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