Alt-A mortgages or home loans are a type of mortgage that is considered to be a higher risk loan than a prime home mortgage loan, but yet still less risky than sub-prime mortgages. Mortgage rates obtained for an Alt-A mortgage are therefore likely to fall between rates obtained for prime and subprime rates. Most Alt-A home loans are written because the borrower has reduced income, an inability fully to document income, a high debt-to-income ratio, or a less than perfect credit history.
Additionally, if the loan-to-value ratio (LTV) on the property is considered too high, many mortgage lenders will drop the mortgage from the prime rate to the Alt-A rate. A cash out mortgage refinance (often for the consolidation of debt, such as credit cards and unsecured loans) may also result in an Alt-A mortgage loan.