What is a Qualified Mortgage?
Buying a home is one of the biggest financial moves you’ll ever make, and if you’re like most people, you’re probably planning on using a mortgage to pay for it.
But like a roommate, a mortgage is something you’ll have to live with every day, so choose wisely!
The best—and safest—choice, is what the Consumer Protection Act calls a Qualified Mortgage.
To be considered a Qualified Mortgage, a loan must offer you certain protections. It must be for 30 years or less. It can’t offer “interest only” payment periods in which your payments only go toward the interest and not the principal. It can’t use “negative amortization” in which your loan principal is actually increasing even though you’re making payments. It also avoids “balloon” payments in which large lump sums are due at scheduled points during the loan period, though exceptions are made for smaller creditors.
As your lender, we want you to be able to repay your mortgage, which is why we take a variety of factors into consideration when offering you a Qualified Mortgage.
The first is your monthly income, which includes your employment status and any assets you own. The second is any debt you may owe, including the cost of the mortgage. These two numbers give us your Debt-to-Income ratio, or DTI. A good target is 43% or less.
Your credit history also plays a role in determining what kind of interest rate you qualify for.
With these numbers in hand, we’ll figure out your Ability to Repay, and hopefully get you into that dream home as soon as possible.
Since your mortgage will be going with you to your new home, we want it to be something you can live with. We are ready to help you start your homebuying process. Reach out today to get started!