Getting a home loan can be an intimidating process, and I know because I’m in the final stages of buying our first home. Adding one more confusing acronym to the mix doesn’t help the situation out too much either.
That’s why we’re here – to help you get a better understanding of the confusing world of mortgage and real estate.
What are Qualified Mortgages?
The newest acronym, QM, stands for Qualified Mortgage. Its a title for specific loans that meet new rules and regulations. They’re designed to protect homebuyers against risky loans and unrepayable situations.
In order to be considered a Qualified Mortgage, the loan must meet certain standards. Here are some do’s and don’ts for QM.
– No interest only loans. The borrower must be paying something to lower the balance of the loan.
– No balloon payments. This is a loan where the borrower has to pay back the balance of the loan in one lump sum at the end of a certain period of time.
– No loans that extend beyond 30 years.
– Borrowers must meet specific criteria to be considered capable of repaying the loan. For example, they need to meet minimum credit history guidelines and have a manageable monthly debt-to-income ratio.
– Limit on amount of fees and costs required to be paid by borrower.
It would be a whole lot easier to understand what was going on if the rules and regulations didn’t change so frequently, but that would probably lead to another bubble burst similar to 2008.
Mortgage rules are designed with the homebuyer’s best interest in mind, and frequently are very helpful. However, sometimes they are untested ideas that can cause more harm than good.
Right now, we’re all playing a waiting game because we don’t know exactly how the rules will impact the mortgage industry and the loan process. Now that it’s been close to a week since the QM effective date, we’ve seen little to talk about and the overall outlook is bright.
Many professionals or becoming more confident that QM will help homebuyers and the mortgage market.
Creekside Mortgage, Inc, if you have more questions or concerns, feel free to reach out to us. 1.800.920.5420.