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What Is An Alt-A Mortgage?

By Bob Redtree

What is an Alt-A Mortgage? Is an Alt-A mortgage the same thing as a sub-prime mortgage? Who can qualify for an Alt-A mortgage in today’s market?

An Alt-A mortgage is a middle ground mortgage. This mortgage is for people who can not qualify completely for a regular mortgage but whose circumstances or credit is not so bad that a sub prime mortgage is needed. The use of Alt-A mortgages comes into effect when a person can not meet all the mortgage standards put forth by Fannie Mae or Freddie Mac. These standards may include multiple streams of income, reliance on investments for income or a debt to income ratio that is too high for a standard mortgage, but not high enough to warrant sub-prime lending.

Is an Alt-A mortgage the same thing as a sub-prime mortgage?

Both programs are designed for people with less than perfect credit or income issues, but they are not the same type of loan. An Alt-A mortgage will have a higher interest rate than a standard mortgage, it will not have as high of a rate as a sub-prime. The current market has made getting an Alt-A mortgage a little harder. Since the sub-prime fall out, lenders are leery of presenting mortgages to anyone that does not meet federal guidelines.

Who can qualify for an Alt-A mortgage in today’s market?

Any bank or lending institution has the option to offer a borrower an Alt-A mortgage. However, in the current housing market, the leniency once associated with these loans is not so readily available. An Alt-A mortgage will probably take longer to process. This type of mortgage is still available on the market, and unlike a sub-prime mortgage, is a safer risk for banks. Consumers must be aware though, they will pay a higher interest rate when using this type of mortgage to purchase a home.

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3. Is FHA Solely For First Time Home Buyers Getting A Mortgage?
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5. What Are Home Mortgage Rates For People With Good Credit?