Alt-A loans (Alternative-documentation loans), have been around awhile. In recent years, however, their meaning has become somewhat blurred. Alt-A loans are primarily credit-score driven, since the candidates for these loans tend to lack proof of income from traditional employment. The Alt-A loan reduces the gathering of documentation associated with fully documented loans, such as providing income verification and documentation of assets. On the other hand, borrowers do pay a slightly higher interest rate, often from a quarter, up to half-point more than fully documented loans.
Since all the ALT A product will go through manual underwriting, the processing time by the lender might take longer than regular conventional loan. However, manual underwriting allows more flexible guideline and the lender is looking for a make sense deals.
Investors and Self Employed borrowers are often the likely candidates for this type of mortgage financing.
Alt-A mortgage loans are usually much more flexible that traditional loans. Commissioned employees are usually good candidates for Alt-A loans due to the inconsistency in their income each month. Alt A might even be considered as a short-term solution, entered into with the understanding that the borrower will refinance later. Employees are usually prime candidates for Alt-A loans due to the instability of their income. For Banks and borrowers alike, Alt A programs are appealing because they are easier to document and have fewer restrictions than conventional loans.