Qualified Mortgage Rules Explained | What Homebuyers Need

Qualified Mortgage rules implemented after the 2008 financial crisis provide important protections for homebuyers by ensuring lenders verify your ability to repay before approving a loan. These QM rules prohibit risky loan features (like negative amortization and interest-only payments for extended periods), cap debt-to-income ratios (generally 43% or below), and require verification of income, employment, and assets. Understanding how Qualified Mortgage requirements affect your Nebraska home loan application helps you prepare properly and ensures you’re getting a mortgage you can truly afford.

Even if you are not in need of a mortgage loan right now, I’d like to share with you 6 things you’ll need to know about when it’s time for you to obtain a new mortgage.

Why were they created? They are a guide for mortgage companies and consumers to make sure that the loan terms are fully disclosed, with no interest rate or payment surprises. It also covers companies who collect your monthly mortgage payment and how they are supposed to disclose your loan information to you.
What does “Qualified Mortgage” really mean? It means that a lender must determine if a borrower has the “ability” to repay the loan, based on income, credit and length of time on the job. And, it’s just not for the first few years of the loan—but over the term of the mortgage.
Are there certain income requirements? Yes, your total debt, including your new mortgage payment, must not exceed 43% of your gross income. That also includes taxes and insurance.
What are the benefits? There are now restrictions on the types of loans that lenders can offer their clients. Risky loans such as “negative” principal (where the loan amount actually INCREASES over time) or “interest-only” loans have been pretty much eliminated.
How hard will it be to get a mortgage? It may be a little bit more challenging than it was before January 10, 2014 (when the rules went into effect) because of the 43% debt-to-income ratio. But, adjustments can be made by paying down some bills or increasing your down payment.
After I sign for the loan, what’s next? Companies must now send you a monthly statement showing you exactly how your payments are credited towards interest and your mortgage balance. If you have an adjustable-rate mortgage, they must give you plenty of notice about how much your payment will increase or decrease. There are also new rules when it comes to loan modifications or foreclosure waiting periods if you are not able to make your monthly payments.

The whole goal is to avoid the mortgage crisis that occurred a few years ago. If you are thinking of buying another home or refinancing, let’s talk—because the rules have changed.

Frequently Asked Questions

What is a Qualified Mortgage (QM)?

A QM is a category of loans that meet specific standards ensuring borrower ability to repay. QM loans prohibit risky features, limit debt-to-income ratios to 43% or below, and require full documentation. Lenders get liability protection for QM loans.

What’s the maximum debt-to-income ratio for a Qualified Mortgage?

Generally 43%, though some loan types (FHA, VA, USDA) may allow higher DTIs. Your DTI includes all monthly debts divided by gross monthly income. Keeping DTI at 43% or below provides better approval odds.

Can I still get a non-QM loan in Nebraska?

Yes, non-QM loans are available for borrowers who don’t meet standard QM criteria (high DTI, non-traditional income, recent credit events). These loans often have higher rates and stricter terms. Discuss with me if you think you need non-QM financing.

How do QM rules protect me as a borrower?

QM rules prevent predatory lending by requiring lenders to verify your ability to repay, prohibiting toxic loan features that caused 2008 foreclosures, and ensuring reasonable monthly payments you can actually afford.