A mortgage for a very stable borrower with excellent employment and credit history. These are sometimes called "vanilla loans" because the meet general mortgage guidelines and are easy to complete.
This type of loan/borrower often qualifies for the most attractive rates available. A credit score of 720+ is one of most important criteria in establishing a “A” rating.
When shopping for a "A" paper credit loan, it is important to remember that this does not necessarly guarantee a low rate. Adjustments will be made to an interest rate for such factors of;
Cash-out of equity
Loan to Value ratios
Ask your mortgage professional about what adjustments will affect your interest rate and payment.
A paper lenders are also more strict on the DTI (Debt to Income) ratios than other lenders. Your normal DTI for conforming loans according to Fannie Mae guidelines is 41% debt ratio, while your subprime lenders will go up to 55% DTI.
A paper loans are also commonly referred to as conforming loans because they conform to standards set by Fannie Mae and/or Freddie Mac.
"A" paper loans are for borrowers with good credit and work history. "A" paper loans conform to standards set by Fannie Mae and/or Freddie Mac.
loans are for borrowers with good credit and work history that do not conform to standards set by Fannie Mae and/or Freddie Mac are called "Alt-A" loans.
A credit is a very loose term that applies to basically just having good credit with a good score. You can have perfect credit, no lates ever, no collections and no derogatory credit ever and still have a low credit score and not be considered "A" credit. There may be many reasons for this low score. You may be maxed out on all of your revolving credit (credit cards and such) and have a lot of inquiries. These two items can negatively affect your score and remove you from the A credit classification.
Probably due in a large part to the complex nature of life in our current times, less and less borrowers are falling into that perfect, vanilla, "A" borrower category. The mortgage market has reacted to this fact and offers a large variety of alternative A and subprime loan programs so that home ownership is possible for just about everyone.
There are automated underwriting systems that will approve borrowers for "A" credit loans even if they do not have high credit scores. These automated systems take into consideration things like cash reserves and overall credit history.
A paper borrowers have the most options availble to them regarding financing. The difference in a 720 credit score and a 620 credit score may be 2% (or higher) interest rate.
If you are an A paper borrower make sure you work with a Mortgage Professional that has programs that reward your high scores. Many mortgage companies specialize in only poor-credit loans and may not have the best program for your needs.