Alt-A - Property and Occupancy Considerations

Property and Occupancy Considerations

Aside from the borrower's credit and financial profile, GSE standards are also generally the most stringent regarding how much of a given property type's value or purchase price is permissible to lend on owner-occupied, second ("vacation") and non-owner occupied ("investment") homes, and under what conditions. The combination of these property and occupancy factors with a given borrower's profile can move the loan out of the "prime" category of agency-conforming loans and into less stringent categories such as Alt-A and subprime. For example, Fannie Mae might agree to purchase all loans made by a particular lender on single family second homes in a particular area at a particular maximum LTV for borrowers within given income, asset and credit limits. Borrowers beyond those limits, or those seeking loans above that maximum LTV for second homes, would need to apply for an Alt-A loan. Borrowers still further outside the income, asset and credit limits might need to consider subprime financing—difficult to find as of 2008.

Similar to Alt-A lending, the jumbo and super-jumbo categories generally use an amalgam of agency and Alt-A guidelines for borrower eligibility while allowing larger maximum loan amounts than those permitted by the GSEs (as of 2007, $417,000 for a single family home outside Alaska, Hawaii, Guam and the US Virgin Islands).