Sierra defines an Alt “A” loan as a high credit, low loan-to-value mortgage (generally less than 80%) that does not qualify for Government-Sponsored Enterprises (GSEs) underwriting (ie Fannie Mae / Freddie Mac).
There are numerous factors that might cause a mortgage not to qualify under the GSEs' traditional lending guidelines even though the borrower's creditworthiness is generally strong. A few of the more important factors are:
- Alternative borrower income documentation is utilized (for example, 24 months bank statements as income for self employed borrowers)
- Borrower’s employment history may be slightly less than GSE guidelines
- Borrower debt-to-income ratios may slightly exceed GSE guidelines (no greater than 43%)
- Credit history with minor problems - but not so many as to be considered “subprime” (for example, lower FICO score or minor delinquencies, but no recent past dues, charge-offs or bankruptcy)
- Property or occupancy characteristics may not meet GSE guidelines
- The loan size may exceed the GSE guidelines.
Alt "A" Mortgages