Qualified Mortgage

What Is a Qualified Mortgage?

A Qualified Mortgage (QM) is a category of home loan that meets specific federal standards designed to ensure the borrower has the ability to repay the loan.

Qualified Mortgages were created under the Dodd-Frank Act and are regulated by the Consumer Financial Protection Bureau.

To qualify as a QM, a mortgage must meet certain criteria related to:

Debt-to-income ratio limits
Restrictions on risky loan features
Caps on certain fees and points
Documentation and underwriting requirements

QM status provides legal protections for lenders who follow Ability-to-Repay guidelines.

Why It Matters

Qualified Mortgage:

Reduces risk of unaffordable loan terms
Limits high-risk features such as negative amortization
Offers lenders legal safe harbor protections

For borrowers, QM loans are generally structured with more predictable repayment terms and fewer high-risk elements.

Not all mortgages are Qualified Mortgages, and non-QM loans may carry different underwriting flexibility and risk profiles.

How Qualified Mortgage Works

Qualified Mortgage requires lenders to verify income, assets, employment status, and debt obligations to demonstrate that the borrower can reasonably repay the loan.

Qualified Mortgage restricts loan features such as interest-only payments, excessive points and fees, and extended terms beyond 30 years.

Qualified Mortgage also generally limits the borrower’s debt-to-income ratio to a defined threshold, although exceptions may apply depending on the loan program.

Lenders who comply receive certain legal protections against borrower claims of unaffordable lending.