What should consumers look for to identify a Qualified Mortgage (QM)?

Consumers should look for clear disclosures regarding loan terms to identify a Qualified Mortgage (QM). A Qualified Mortgage is designed to protect borrowers by ensuring that they receive fair and transparent information about their loans. Clear disclosures help consumers understand the total cost of the loan, including interest rates, fees, and payment structures, allowing them to make informed decisions.

This transparency is a critical component of consumer protection and aligns with the requirements established under the Dodd-Frank Act, which was enacted to ensure that lenders provide borrowers with the necessary information to assess the risks and benefits of their mortgage options. A QM must adhere to specific guidelines, including standardization of loan features and limits on certain risky loan characteristics, making clear disclosures vital to its definition.

In contrast, options that suggest higher interest rates, unclear terms, or loan features that increase payments do not align with the principles of a Qualified Mortgage. These characteristics would typically indicate a loan that could pose risks to the borrower, thus not meeting the QM standards meant to promote responsible lending practices.