An Alt-A loan, also called an alternative documentation loan, is a loan that holds borrowers with good credit to different approval standards than traditional loans. Those applying for an Alt-A loan need not provide income verification or documentation of assets. Instead, the approval for an Alt-A loan is based primarily on an individual’s credit score. People who are great candidates for Alt-A loans include the recently divorced, entrepreneurs, the self-employed, and those who are paid on commission.
Alt-A loans are typically subject to manual underwriting, which may make the process take as long, if not longer, than securing a traditional loan. However, one of the benefits of manual underwriting is the increased flexibility provided to the borrower. Another point about Alt-A loans is that their interest rates are usually slightly higher than traditionally documented loan. This amount is usually less than one percentage point higher than a conventionally documented loan. That being said, many individuals applying for an Alt-A may not qualify for conventional loans because of their unique situations.
There are a number of subtle variations among different Alt-A loans, making it important for borrowers to get all the facts before making any commitments.
12 Responses to “What’s an Alt-A loan?”
[...] It seems that IndyMac pioneered ‘the issuance of so-called Alt-A mortgages to people with blemished credit histories.’ ‘(WSJ) Yes, that sounds rather risky. Here’s an explanation of that sort of loan. An Alt-A loan, also called an alternative documentation loan, is a loan that holds borrowers with good credit to different approval standards than traditional loans. Those applying for an Alt-A loan need not provide income verification or documentation of assets. Instead, the approval for an Alt-A loan is based primarily on an individual’s credit score….. [...]
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[...] an actual decline in REO properties this year the other areas are holding steady. As expected Alt-A loans were the biggest pool of foreclosures that both companies currently [...]
ALT A loans are a large part of the current crisis. So are the brokers and lenders who let them coast through without proper investigation of the borrower’s finances and ability to pay.
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This category of loans should never have been allowed in the first place.
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Can an Alt-A loan be modified? I’m currently trying to get my mortgage company to lower my interest rate and their reply is they can’t because it is an Alt-a loan.
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