The QM requirements generally focus on prohibiting certain risky features and practices, such as negative amortization and interest-only periods and loan terms longer than 30 years, and prepayment penalties. In addition, for all types of QMs, points and fees are generally limited to 3 percent of the total loan amount, but higher thresholds are provided for loans below $100,000.
What is the ATR/QM rule about? The ATR/QM rule requires that you make a reasonable, good-faith determination before or when you consummate a mortgage loan that the consumer has a reasonable ability to repay the loan, considering such factors as the consumer’s income or assets and employment status (if relied on) against: The mortgage loan payment Ongoing expenses related to the mortgage loan or the property that secures it, such as property taxes and insurance you require the consumer to buy Payments on simultaneous loans that are secured by the same property Other debt obligations, alimony, and child-support payments. The rule also requires you to consider and verify the consumer’s credit history. As discussed in more detail below, the rule provides a presumption that you have complied with the ATR rule if you originate QMs. 14 CONSUMER FINANCIAL PROTECTION BUREAU QMs generally cannot contain certain risky features (such as allowing interest-only payments or negative amortization). In addition, points and fees on QMs are limited. For a loan to be a QM, it also must meet certain underwriting criteria. In exchange for meeting these requirements.
Simply put, a mortgage is a loan secured by real property and paid in installments over a set period of time.
The mortgage secures your promise that the money borrowed for your home will be repaid.
According to Wikipedia:
A mortgage loan is a loan secured by real property through the use of a document which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
Components of a Mortgage:
In addition to personal qualifying factors, a property must also meet certain standards set by lenders before a borrower can obtain a mortgage loan secured by real estate.
On a traditional 30 or 15 years fixed rate mortgage program that involves principal and interest, each payment made is divided into two parts (we’re not including taxes or homeowners insurance as part of this discussion):
The first part of the mortgage payment, which is commonly referred to as principal, goes to paying down the initial amount borrowed.
The second part is the interest paid for the money borrowed to purchase the property.
The amount paid in interest decreases each month, as the amount paid towards the principal balance increases. This apportioning is referred to as amortization.
Other types of mortgage payments available can include options for paying interest only or a teaser rate.
Either way, it is extremely important to have a solid understanding of the full payment and terms before moving forward with a particular option.
The actual cost of obtaining a mortgage mainly depends on whether or not the borrower is paying points for a lower mortgage rate. In some cases, there are also other loan processing and underwriting fees associated with the work involved in the transaction.
Fortunately, there are several consumer protection policies implemented by the government to help borrowers understand their options during the initial mortgage pre-qualification process. However, please keep in mind that there may be other closing costs not associated with a mortgage or real estate transaction to be aware of. Appraisal, pre-paid property taxes, insurance and interest, HOA dues and inspections are a few additional out-of-pocket expenses you should budget for.
While mortgage interest rates may change several times a day, there are a few market factors you can pay attention to which may impact your final payment.
Whether you’re shopping for the best rate, or trying to determine the difference between the Note Rate and APR, it definitely helps to understand what questions to ask a mortgage lender about your specific loan scenario.