What is a Qualified Mortgage?
There are Qualified Mortgages and unqualified Mortgages. “A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan.” states the Consumer Financial Protection Bureau. A Qualified Mortgage is one where the lender makes a genuine effort to make sure that you are not getting a loan that you do not have the financial ability to afford. Here are some features that a qualified mortgage prevents.
- An “interest-only” period, when you pay only the interest without paying down the principal, which is the amount of money you borrowed.
- “Negative amortization,” which can allow your loan principal to increase over time, even though you’re making payments.
- “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.
- Loan terms that are longer than 30 years.
- No limit on the amount of your income that can go towards your mortgage.
- No limit on excess upfront points and fees.
- There is little to no legal protection for your lender if you can not repay your mortgage. Qualified Mortgages are meant to make sure and prove that you can repay your loan. Without these protections in place, you have more legal options.
The above information is from Consumer Financial Protection Bureau
There’s a lot that goes into a Mortgage, both on the lender and consumer side. Make sure you know how your lender qualifies their loans. Stay away from unqualified loans as they could lead to serious financial implications in your future.
Finally – I want to sum this up by saying DO YOUR RESEARCH. No one knows your finances better than yourself. Can you afford the added expense of a Mortgage? If the answer is yes then make sure you finance it right. Don’t get blindsided. A hike in your interest payment. Make smart decision and make informed ones as well.