Qualified Mortgage (QM)
A Qualified Mortgage (QM) is a category of residential mortgage loan that meets specific underwriting and structural requirements defined by the Consumer Financial Protection Bureau under the Ability to Repay rule. QM loans provide lenders with legal protection against borrower claims that the lender failed to verify repayment ability.
What This Means
QM Requirements
To qualify as a QM, a loan must meet several criteria established under CFPB regulations. The borrower's debt-to-income ratio generally cannot exceed 43% , though loans eligible for purchase by Fannie Mae or Freddie Mac may qualify under separate GSE patch provisions. QM loans cannot include risky features such as negative amortization, interest-only payments, balloon payments (with limited exceptions for small creditors), or loan terms exceeding 30 years. Total points and fees are capped at 3% of the loan amount for loans of $100,000 or more .
Types of Qualified Mortgages
There are several QM categories:
- General QM - Meets the DTI and pricing thresholds established by the CFPB
- GSE-eligible QM (Temporary Category) - Loans eligible for purchase or guarantee by Fannie Mae, Freddie Mac, or a federal agency
- Small Creditor QM - Originated by institutions with assets below specified thresholds, allowing some flexibility on DTI and balloon features
- Seasoned QM - Non-QM loans that can achieve QM status after 36 months of on-time payments with no delinquencies exceeding 60 days
What QM Status Means for Borrowers
Most conventional and government-backed mortgages are QM loans. Borrowers benefit because QM standards ensure basic underwriting discipline, including income verification and prohibition of predatory loan features. Lenders prefer QM loans because they receive a legal safe harbor or rebuttable presumption of compliance with the ATR rule, reducing litigation risk. Non-QM loans exist for borrowers who do not fit standard qualification criteria but typically carry higher rates and fewer consumer protections.