What is required for a loan to be considered a “qualified mortgage” (QM)?

A loan is classified as a “qualified mortgage” (QM) when it adheres to specific guidelines established by the Consumer Financial Protection Bureau (CFPB). These criteria focus on ensuring that borrowers have the ability to repay the loan, which is a critical aspect of promoting responsible lending practices.

The requirements for a qualified mortgage include limits on certain risky features that could jeopardize the borrower’s financial stability. For example, QMs typically cannot have excessive points and fees, cannot involve terms that extend beyond 30 years, and must maintain a cap on the debt-to-income ratio. The intent of these provisions is to protect borrowers from entering into potentially detrimental loans that they may struggle to repay.

In contrast, the other options do not encompass the full range of criteria necessary for a loan to be classified as a QM. A fixed interest rate, government issuance, or the loan being a conventional type are not definitive requirements for a loan to achieve QM status. Therefore, the answer that emphasizes adherence to CFPB criteria regarding borrower ability to repay and loan features is accurately reflective of what constitutes a qualified mortgage.