What is 'Alt-A'

Alt-A is a classification of mortgages where the risk profile falls between prime and subprime. The borrowers behind these mortgages will typically have clean credit histories, but the mortgage itself will generally have some issues that increase its risk profile. These issues include higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower's income.

BREAKING DOWN 'Alt-A'

These types of loans are attractive to lenders because the rates are higher than rates on prime classified mortgages, but they are still backed by borrowers with stronger credit ratings than subprime borrowers. However, with the higher rates comes additional risk for lenders because there is a lack of documentation - including limited proof of the borrower's income.

RELATED TERMS
  1. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  2. Risk-Based Mortgage Pricing

    Mortgage lenders' offers of different interest rates and loan ...
  3. Low / No Documentation Loan

    A category of loans which generally fall into the Alt-A sector ...
  4. Subprime Borrower

    A person who is considered a higher-than-normal credit risk. ...
  5. Subprime

    A classification of borrowers with a tarnished or limited credit ...
  6. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
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RELATED FAQS
  1. What is a subprime mortgage?

    A subprime mortgage is a type of loan granted to individuals with poor credit histories (often below 600), who, as a result ... Read Answer >>
  2. What are the different types of subprime mortgages?

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  3. How much risk is associated with subprime mortgages?

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  4. How does the loan-to-value ratio affect my mortgage payments?

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