Full Doc Vs. Alt Doc Vs. Low Doc – What’s The Difference?
Income verification is a hot topic for self-employed borrowers and the brokers who help them. Find out how Bluestone defines full, alternative and low documentation
You don’t have to spend much time in the broking community before terms like alt doc and low doc start popping up. Most brokers will have a decent understanding about what these terms refer to, but some remain unsure, especially when it comes to the difference between alt and low doc loans. To clear up any misconceptions, we’ve laid out how Bluestone defines different income verification methods.
Full doc – Full documentation
A full documentation, or full doc, loan is exactly what it says on the package – a loan for a borrower who has access to all income verification documents the lender requires. Exact requirements for documentation vary across lenders.
At Bluestone, borrowers are considered fully documented in our near prime product when they are able to provide:
– 2 last payslips, plus 3 months’ personal bank statements for PAYG borrowers, or
– 2 years’ tax returns with notices of assessment (NOAs), and 3 months’ personal bank statements for self-employed borrowers
Alt doc – Alternative documentation
Alternative documentation, or alt doc, loans are used by self-employed borrowers who have income evidence, but not in the form mainstream lenders generally prefer – usually 2 years’ of fully audited and lodged tax returns with a Notice of Assessment (NOA).
Alt doc is a relatively new term and is often used interchangeably with low doc in broker circles. At Bluestone we prefer to use the term alt doc, as low doc implies a lower level of scrutiny of a borrower’s finances. While we do our best to provide flexibility in our documentation requirements, we still require a level of evidence that ensures we can build a realistic picture of your customers’ borrowing capacity.
The level of alternative documentation Bluestone require varies across our loan products. At minimum we accept an accountant’s letter confirming self-reported income levels coupled with personal bank statements for the past three months.
On the flipside, if your customers are hoping to secure our competitive near prime rates, the minimum amount of alternative documentation they must provide is 6 months business bank statements and 3 months personal bank statements plus either 6 months business activity statements (BAS) or an accountant’s letter.
Low doc – Low documentation
As mentioned above, low doc and alt doc are often used interchangeably to talk about the same kind of loan. However, some lenders do offer loan solutions that truly require low, or even no, documentation.These loans will have to be unregulated and are geared toward private funders with a much higher rate due to the risk undertaken.
As all Bluestone loans are regulated, we do not offer no doc loans. Instead, we make sure we take the time to really understand each customer’s unique financial situation, so that we can gain a realistic understanding of their cash flow even if their bank statements tell a different story at first glance.
If you are concerned about a customer’s ability to verify their income, reach out to your Bluestone BDM and they will assist you in finding the best solution for your scenario.