What is required to be considered a Qualified Mortgage?

To be classified as a Qualified Mortgage (QM), a loan must conform to specific lending standards set forth by regulatory authorities, such as those from the Consumer Financial Protection Bureau (CFPB). These standards were established to protect consumers by ensuring that certain basic criteria are met, which helps prevent lending practices that could lead to borrowers being unable to repay their loans.

These specific lending standards include criteria such as limits on fees and points, maximum loan amounts, verification of the borrower’s ability to repay the loan, and restrictions on risky loan features like negative amortization or interest-only payments. By adhering to these guidelines, Qualified Mortgages aim to promote responsible lending and minimize the risk of borrower defaults.

While other options mention aspects that might be relevant in different contexts, such as income verification, credit scores, or interest rates, they do not encapsulate the comprehensive criteria that define a Qualified Mortgage. The focus is on the conformance to the established lending standards, which is essential for ensuring that loans are originated in a safe and sound manner for both lenders and borrowers.