Qualified Mortgages (QM-Loans)
Key Features to Know
Qualified Mortgage (QM) Loans: Features and Requirements
A Qualified Mortgage (QM Loan) is a category of loans that have certain, less risky features. These features, defined by the Consumer Protection Bureau (CFPB), help make it easier to afford your loan payments. QM loans were established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, providing better consumer protections and more standardized mortgage products. So, how do you know if you have a Qualified Mortgage? Well, if your current loan has any of the below, then it is possible you have a Non-Qualified Mortgage:
- An "interest-only" period. Or when you pay only the interest without paying down the principal, which is the amount of money you borrowed. This payment structure doesn't help you build equity in your home, which is one of the primary benefits of homeownership and wealth-building.
- "Balloon payments," which are larger-than-usual payments at the end of a loan term. The loan term is the length of time over which your loan should be paid back. Note that balloon payments are allowed under certain conditions for loans made by small lenders. These can be risky as they require significant funds at the end of the term, which borrowers may struggle to provide.
- Loan terms that are longer than 30 years. Traditional mortgage terms typically range from 15 to 30 years, and extending beyond this timeframe often increases the total interest paid substantially over the life of the loan.
Key Benefits of Qualified Mortgages
- Ability-to-Repay (ATR) Protection: Lenders must verify your income, assets, and obligations to ensure you can realistically repay the loan.
- No Excessive Upfront Points and Fees: QM loans limit the amount that lenders can charge in points and fees.
- No Risky Loan Features: QM loans cannot include risky features like interest-only periods, negative amortization, or loan terms exceeding 30 years.
- Debt-to-Income Ratio Considerations: Many QM loans have limits on debt-to-income ratios, though exceptions may apply based on compensating factors.
When Might a Non-QM Loan Be Appropriate?
While Qualified Mortgages offer significant consumer protections, there are specific situations where Non-QM loans might be suitable:
- Self-employed borrowerswith complex income documentation needs
- Real estate investorslooking to qualify based on property cash flow rather than personal income
- Borrowers with recent credit events like foreclosure or bankruptcy who don't qualify for conventional loans
- Individuals with high net worth but low documented income who need asset-based qualification
And while SRK CAPITAL has Non-QM Loans available, we know they are not for everyone. Many of our clients prefer QM loans and the benefits that they offer.
So What Types of Mortgages Fall Under a Qualified Mortgage?
SRK CAPITAL has a wide range of Qualified Mortgage programs available for eligible borrowers.
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Let us help you unlock exclusive benefits, competitive rates, and better loan programs that make home ownership accessible and affordable. Get in touch with SRK CAPITAL today. A better lending experience is just a conversation away!