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Non-Qualified Mortgages Versus Qualified Mortgages
What Are Non-Qualified Mortgages Versus Qualified Mortgages?
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QM Loans: Qualified-Mortgage Loans
The Consumer Financial Protection Bureau (CFPB) has strict criteria for classifying loans as qualified mortgages. One of them is a cap on debt-to-income ratios at 43%. Other criteria include prohibiting interest-only payments, common among risky loans, and ensuring borrowers can repay their debts.
Non-QM Loans: Non-Qualified Mortgage Loans
Non-qualified mortgages, on the other hand, don’t adhere strictly to QMs, but they still provide safe and responsible lending. These loans offer more flexibility to cater to unconventional income sources such as self-employment, investors, or people with credit challenges.
Key Differences between Non-QM and QM Loans:
QM loans have stringent guidelines, making them less risky. In contrast, non-qualified mortgages have higher risks and typically attract higher interest rates.