What is a key requirement for a mortgage to qualify as a Qualified Mortgage (QM)?

A mortgage qualifies as a Qualified Mortgage (QM) primarily because it must meet specific borrower qualification criteria. These criteria are designed to ensure that the mortgage is more likely to be repayable and to protect consumers from non-transparent loan terms or practices that could lead to foreclosure.

One of the central features of a QM is that it includes provisions around the borrower’s ability to repay (ATR), which requires lenders to assess a borrower's financial circumstances, such as income, employment status, credit history, and existing debt burdens, before offering a mortgage. This approach helps in reducing the risk of default for both borrowers and lenders.

While fixed interest rates, higher borrowing limits, or the absence of credit checks might seem like attractive features for various types of loans, they do not specifically align with the key regulatory framework established under the qualified mortgage definitions. Instead, the emphasis is placed firmly on ensuring that lenders are making responsible lending decisions based on the financial capabilities of the borrower, leading to a more stable mortgage market overall.