What is an Alt-A Mortgage?
An Alt-A mortgage could be described as mortgage for those with lower than good credit scores, and yet not low enough scores to justify a subprime rate. They are thus riskier lending than prime mortgages and not as risky as subprime loans. They’re also seldom available since the subprime mortgage crisis in the US, and lending restrictions have tightened to avoid people defaulting on mortgages. There are several common features of the Alt-A mortgage. People who applied for them had more limited documentation requirements than did people applying for A-paper mortgages. Moreover, credit scores were usually less than 680, and people might possess a higher debt to income ratio than 35%. Another element of this type of mortgage was limitation on down payment, and many of these mortgages were structured with piggyback loans that would help people meet the down payment by taking out a second on third loan. This helped to avoid paying personal mortgage insurance (PMI). These mortgages shouldn’t
An Alt-A mortgage is a loan that almost fits into conforming guidelines. Typically, an Alt-A mortgage is made due to the loan size limitations provided by Fannie Mae and Freddie Mac, although there could be other factors that make the loan fall outside of a conforming loan. Typically the rates on Alt-A loans are slightly higher than conforming loans. What is a subprime mortgage?A subprime mortgage is a loan that falls outside of conforming and Alt-A guidelines. It generally has higher rates than Alt-A loans but typically has easier guidelines that help borrowers qualify for loans that they might not otherwise qualify for. What does LTV stand for? Loan to Value (LTV). These ratios are useful in helping determine the amount of risk the bank is taking on in making a mortgage loan. LTV is a simple calculation where you divide the loan amount by the appraised value. The lower this number, the less risk there is for the bank. What does DTI stand for? Debt to Income (DTI). This ratio also hel
