What is an ALT-A Loan?

An ALT A loan is a term used from lenders and mortgage brokers for loans that are not usually the A Paper best rate loan, nor are they the subprime loan with very high interest rates. ALT A loans are for people who make a great income, have a good credit score, however have a hard time proving their income. An example would be a self employed borrower who makes $250,000 a year, however for tax purposes, writes alot of that income off. This would be considered an ALT A loan.

Some Alt A loan borrowers are simply borrowers who do not qualify for a traditional A paper loan because they are just slightly deficient in a certain area. For instance their credit score may be just slightly too low, or they may not have enough asset documentation to qualify for the A paper loan.

Alt-A loans are not relatively new loan products. Alt-A loans have been around for almost 20 years. However, these loans were niche products that were not made readily available to most borrowers due to the level of risk.

Alt-A loans are the borrower classification between subprime and prime. Alt-A loans will usually have a higher interest rate that prime loans. Alt-A loans will also have the ability to borrow a lower percentage of the home value than prime loans.

Alt-A Loans typically carry a slight premium to the interest rate of traditional A paper loans sold to Fannie Mae or Freddie Mac loans. Investors often find they need to use Alt-A financing for additional rental property purchases or cash-out refinances.

Alt A mortgage is an alternative for home buyers with good credit profiles and yet for one reason or another cannot meet the qualification of prime (A paper) mortgage. Alt-A mortgages are not considered subprime loans because most alt-A borrowers have excellent credit scores.

Alt A Loan programs are designed for borrowers with good credit but difficult income or asset documentation or a need for sophisticated amortization or payment features.