Why might borrowers choose an Alt-A loan over a traditional mortgage?

Borrowers often opt for an Alt-A loan because these loans typically require less documentation than traditional mortgages. This can make the loan approval process faster and more accessible for borrowers who may not have comprehensive financial records or who are self-employed. Alt-A loans cater to borrowers who fall somewhere between prime and subprime categories, allowing for more flexible underwriting criteria.

For individuals who may find it challenging to provide detailed financial documentation, such as tax returns or extensive credit histories, the streamlined process of an Alt-A loan can be particularly appealing. This option provides an opportunity for borrowers to secure financing even if they do not meet the stricter requirements set by traditional mortgage lenders.

While lower interest rates, federal insurance, and fixed repayment terms may be attractive features, they are not the primary distinguishing characteristics of Alt-A loans compared to traditional mortgages.