What are the four types of a QM?

There are four distinct types of QMs, each with its own set of characteristics and requirements. Understanding these types is crucial for lenders and borrowers alike.

The first type of QM is the General QM. This category applies to most traditional, fixed-rate mortgages that meet certain underwriting standards. The General QM is designed to be a safe and sound lending product for borrowers.

Another type of QM is the Temporary QM. These loans are designed to provide flexibility during periods of market uncertainty or regulatory change. Temporary QMs may have slightly different requirements than General QMs, but they still must adhere to the points-and-fees caps.

The rule governing qualified mortgages (QMs) sets a limit on the points and fees that can be charged for all types of QMs. This ensures that borrowers are not overburdened with excessive costs.

Small Creditor QMs are tailored specifically for smaller lending institutions that may not have the same resources as larger banks. These QMs have more flexible underwriting standards but still must comply with the rule's points-and-fees limits.