What distinguishes non-qualified mortgages (non-QMs) from qualified mortgages (QMs)?

The distinguishing characteristic of non-qualified mortgages (non-QMs) compared to qualified mortgages (QMs) is that non-QMs do not have to meet specific regulatory criteria established by the CFPB. Qualified mortgages are designed to provide a greater level of consumer protection by ensuring that certain underwriting standards are met, including limits on debt-to-income ratios, requirements for verifying income and assets, and prohibitions on risky loan features like negative amortization.

Non-QMs, on the other hand, are not bound by these strict criteria and can offer more flexibility in underwriting. This flexibility can lead to a wider variety of loan products that cater to borrowers who may not conform to typical financial standards or who may require more personalized lending arrangements.

The other statements focus on aspects that may not accurately reflect the nature of non-QMs, such as cost or documentation requirements, which vary widely among lenders and the specific loan structures rather than being inherent features of non-QMs themselves.