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Real Estate Terms & Meanings | Real Estate Dictionary | Property Language Explained |    Dec 07, 2023
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Alt-A loan or Alt A Loan

An 'alternative documentation loan'. A mortgage loan granted on atypical terms to a borrower who does not comply with normal lending criteria. In particular, a loan granted on the basis of limited or alternative forms of documentation supplied by the borrower to that which would be required from a 'prime' or 'A' mortgage borrower. For example, a loan to a borrower who might have a good credit record, but when limited information is provided as to the borrower's income or assets, or a loan granted on especially favourable terms, such as a low initial interest rate or delayed principal repayments. An Alt-A loan is generally granted to such borrowers as the self-employed, someone who is recently divorced and may have limited immediate resources, or someone whose pay is based predominately on commission or irregular income. The interest rate on an Alt-A loan is usually slightly higher than a prime or conventional loan, but unlike a subprime loan as a rule there are not excessive fees or penalties for early repayment. (Alt-A loans may be considered as a form of subprime loan, although an Alt-A borrower generally had a slightly higher credit score than a subprime borrower.)
    An 'option' adjustable-rate mortgage (ARM), which is granted at a low initial interest rate that is reset after a few years, may be considered as an Alt-A loan if the borrower would not have qualified for the loan when assessed on the basis of a standard interest rate. Sometimes called an 'Alt-minus loan'. See also toxic asset.

Terms in bold are defined elsewhere in the Encyclopedia.
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