What Are Low Doc (Alt Doc) Home Loans & How Do They Work?

Okay, so you're thinking about buying a home, but you're self-employed, a contractor, or run your own small business. Maybe you don't have the perfectly neat and tidy payslips and tax returns that banks usually love. If that sounds like you, you might be wondering about low doc home loans (also sometimes called alt doc home loans).

These loans are designed for people just like you, and they're becoming increasingly important in 2025. Why? Because the way we work is changing. More and more people have irregular incomes, work multiple jobs, or have started their businesses more recently. Low doc loans offer a way to get a mortgage with alternative ways of proving your income, making the dream of home ownership accessible to more people.

Think of this as your plain-English guide to understanding low doc loans. We'll cover what they are, who they're for, how they work, the potential costs and risks, and even some smarter alternatives. Let's dive in!

What is a Low Doc Home Loan?

Simply put, a low doc home loan is a mortgage that doesn't require the same level of income verification as a standard, or full doc, loan. With a full doc loan, you typically need to provide things like payslips, tax returns, and employment history. But with a low doc loan, lenders are more flexible and will accept alternative documentation.

You might also hear the term "alt doc" thrown around. In most cases, it's used interchangeably with "low doc," but sometimes it refers to specific types of alternative documentation. For example, instead of tax returns, you might use bank statements, BAS statements, or an accountant's letter to prove your income.

Sometimes, a lender might classify your home loan as non-conforming. This basically means your loan application doesn't fit their usual criteria. Low doc loans often fall into this category.

Who Are Low Doc Loans For?

These loans are particularly helpful for a few key groups:

• Self-employed individuals: This includes sole traders, company directors, freelancers, and gig workers. If you're your own boss, you likely experience income fluctuations that traditional lenders might not understand.

• Recently self-employed: Many lenders want to see a long track record of employment. If you've only recently started your business, a low doc loan can help you get your foot in the door.

• Individuals with irregular income or multiple income sources: If you have income from various sources, or your income varies from month to month, a low doc loan might be a good option.

• Investors needing speed or flexibility: Sometimes, investors need to act quickly to secure a property. Alt doc loans can often be processed faster than full doc loans.

Important Disclaimer: Just because you can get a low doc loan doesn't always mean you should. It's crucial to carefully consider the risks, interest rates, and deposit requirements before making a decision.

How Low Doc Loans Work (End-to-End)

The process of applying for a low doc loan is similar to a full doc loan, but with a few key differences in how your income is assessed.

Assessment Differences:

Instead of relying on payslips and tax returns, lenders will typically use one of the following income verification pathways:

• 6–12 Months of Bank Statements: Lenders will analyze your business and personal bank statements to get a sense of your income and expenses. They'll look for consistent income deposits and healthy cash flow.

• Recent BAS Statements: Business Activity Statements (BAS) show your GST obligations and can provide a snapshot of your business income.

• Accountant's Declaration: A letter from your accountant can verify your income and confirm the financial health of your business.

• Lease/Rental Income Evidence: If you own investment properties, the rental income can be used to supplement your income assessment.

Risk Settings:

Because low doc loans are considered riskier for lenders, they often come with certain conditions:

• Lower Maximum LVR (Loan-to-Value Ratio): The LVR is the amount you borrow compared to the property's value. Low doc loans often have lower maximum LVRs than full doc loans. This means you'll need a larger deposit (explain conceptually what LVR is for those new to buying). For example, if a full doc loan might allow you to borrow up to 90% of the property's value, a low doc loan might cap this at 80% or even lower.

• Higher Interest Rates and/or Risk Fee: To compensate for the increased risk, lenders typically charge higher interest rates or a one-off risk fee (more on this later).

• Extra Scrutiny: Lenders will carefully review your credit history, ATO debts, and cash flow to assess your overall financial stability.

The Process:

Here's a simplified flowchart of the low-doc loan application process:

Enquiry → Document Path Chosen (Bank Statements, BAS, Accountant's Letter) → Lender Shortlist → Valuation → Approval → Settlement

Comparison Table: Required Documents — Low Doc vs Full Doc Home Loans

Low Doc / Alt Doc Home Loan

Income Verification-

- Business Activity Statements (BAS, often last 6–12 months)
- Business and personal bank statements (often last 6 months)
- Accountant’s declaration or letter
- Accountant’s signed financial position declaration

Business & Registration Proof (for self-employed)

- Proof of ABN registration (commonly at least 6 months, sometimes 2 years)
- Proof of GST registration (where applicable)

Business Financial Statements

May include:
– Interim financials
– Profit & Loss statements (if available, optional)

Identification Documentation- Identification (e.g., driver’s licence/passport)

Application Notes

Offers flexibility for those lacking traditional income proof—but may require higher deposit or incur higher interest rates

Key Features You Can Still Get

Despite the different documentation requirements, you can still access many of the same features available with full doc loans:

• Fixed, Variable, and Split Options: You can choose the interest rate structure that best suits your needs.

• Offset and Redraw Availability: These features allow you to reduce the interest you pay on your loan and access extra funds when needed.

• Interest-Only Periods: In some cases, you may be able to opt for an interest-only period, which can help with cash flow in the short term.

• Extra Repayments: You can typically make extra repayments to pay off your loan faster and save on interest.

Eligibility & Typical Lender Criteria

While low doc loans are more flexible than full doc loans, you'll still need to meet certain eligibility criteria. Here are some common requirements:

• ABN Age: Lenders often want to see that your ABN has been active for at least 12-24 months.

• GST Registration: If your business turnover exceeds a certain threshold, you'll need to be registered for GST.

• Credit Score/History: A good credit score is essential. Lenders will look for a history of responsible credit management.

• Deposit & LVR: You'll need a deposit, and the LVR will typically be lower than with a full doc loan. Having genuine savings (money you've saved yourself) can also help.

• Property Type: Lenders prefer standard residential properties. Unique or unusual properties may result in a lower LVR.

Red Flags:

Certain factors can make it difficult to get approved for a low doc loan:

• ATO Debt: Outstanding tax debts can be a major red flag.

• Recent Mortgage Arrears: A history of missed mortgage payments will raise concerns.

• Unstable Trading: Significant fluctuations in your business income can make it harder to get approved.

Costs: Rates, Fees & Risk

It's important to understand the costs associated with low doc loans:

• Higher Interest Rates: As mentioned earlier, low doc loans typically have higher interest rates than full doc loans. This is because lenders consider them riskier.

• Risk Fee vs. LMI: Instead of Lender's Mortgage Insurance (LMI), which is common with high-LVR full doc loans, some lenders charge a one-off risk fee on low doc loans. LMI protects the lender if you default on your loan. A risk fee serves a similar purpose but is typically non-refundable.

• Other Costs: You'll also need to factor in other costs, such as application fees, valuation fees, legal fees, and settlement fees.

Example: Let's say you're borrowing $400,000 with a low doc loan and the lender charges a 2% risk fee. That's an extra $8,000 you'll need to pay upfront! This highlights why refinancing to a better rate later can be so important.

Applying for a Low Doc Loan (Checklist)

Ready to apply? Here's a checklist to help you prepare:

• Identity & Residency Documents: Driver's license, passport, utility bills, etc.

• Income Verification Path: Decide which income verification method you'll use (bank statements, BAS, Accountant's letter).

• Business Documents: ABN, GST registration, company extracts (if applicable).

• Evidence of Deposit & Buffers: Bank statements showing your deposit and any additional savings.

Broker Tip: Package your documents clearly and completely to reduce back-and-forth with the lender.