If you haven’t heard the term, “Alt-A” before it’s because it’s a behind-the-scenes term that lenders use. Maybe you’ve heard of the terms “low-doc,” no-doc” or “sub-prime.” These are the loans most responsible for the real estate bubble and then crash of the early 2000’s. These loans were abused horribly to get people into homes they couldn’t afford with predictable results. Can you say housing bubble and market crash of 2008?
There is talk in the industry of bringing these loans back, but in a much different way than they were used in the past (so you can put your pitchforks down, at least for now). There is a small population of potential homebuyers who can’t qualify for a regular loan through normal underwriting. It could be a small business person who can’t show a net profit because they are plowing everything temporarily back into the business, or someone whose income fluctuates greatly from month to month or even year to year. These are people that can afford to make their house payment and are considered good credit risks by some lenders, but the “Alt-A” loan business dried up several years ago.
There are lenders that may be willing to lend to these borrowers again, albeit at a higher rate than they would to a regular W-2 wage earner with a 10-year history on the job. So if you are one of these types of people, check with your favorite lender representative to see if there is an option for you now even if you were turned down as recently as last year.
Now, if lenders start to encourage buyers to lie about their income again to take on a loan they really can’t afford (“liar loans”), then by all means get out your pitchforks and I’ll meet you at your bank with the tar and feathers!
If you have any questions regarding your Real Estate needs, don’t hesitate to contact me.