Alt-A or B Mortgage Financing
This type of mortgage financing is for borrowers who do not meet the more rigid lending guidelines of A lenders. Your A lenders are typically your banks, credit unions, and nonbank lenders currently called monoline lenders. There are 25 A lenders in Canada. They prefer working with salary or hourly income clients with excellent credit. Alt-A or B financing lenders consist of ten lenders. They have more aggressive lending policies.
Type of borrowers:
Borrowers with lower credit scores.
Borrowers going through a consumer proposal or recently out of bankruptcy,
Self-employed or commission borrowers who reduce their income through expenses so therefore show less income on their net tax returns than what A lender would require. When qualifying through an A lender such as a bank or monoline lender they only look at the net income. An Alt-A lender will look at the gross income. Nowadays 60% of all self-employed borrowers use Alt A lending.
Alt-A rates are typically 0.75% to 1% more than traditional A lending rates and have a 1.5% to 2% set up (once only) fee. Terms vary from 1 to 3 years, but most borrowers will go with a 1 year and then reassess in 12 months. The minimum down payment is 20%. There is no high ratio lending i.e. minimum 5% down payment on Alt A lending.
Alt-A financing provides a flexible solution for those who may not fit traditional lending guidelines but still have the means and stability to move forward with their homeownership or refinancing goals.