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Real Estate Encyclopedia | Property Law Dictionary | Real Estate Terms | Meanings & Definitions |      Feb 16, 2019

More New Real Estate Terms

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, 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.
  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.

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