What is a qualified mortgage in simple terms?

A qualified mortgage is a home loan that meets the CFPB’s safety standards: no interest-only payments, no negative amortization, no balloon payment, a term of 30 years or less, capped upfront fees and pricing within set limits. Lenders that make QM loans are presumed to have met the federal ability-to-repay rule.

Is there still a 43% DTI limit on qualified mortgages?

Not as the main test. The CFPB replaced the 43% debt-to-income cap in its General QM definition with a pricing limit based on how far the APR sits above the average prime offer rate. Lenders still must consider your DTI or residual income.

Are FHA and VA loans qualified mortgages?

Yes. FHA, VA and USDA loans are qualified mortgages under their agencies’ own QM rules.

What is the difference between QM and non-QM loans?

A QM loan fits the CFPB’s standard box, usually with W-2 or tax-return income. A non-QM loan still verifies that you can repay, but uses other documentation such as bank statements, a CPA-prepared P&L, assets or rental income, or includes features like interest-only payments.

Are non-QM loans risky for borrowers?

Not inherently. Non-QM lenders still must verify your ability to repay. Down payments are often larger than on a comparable QM loan, and pricing varies with the market, sometimes more competitive than borrowers expect. They suit borrowers whose real finances don’t show up well on tax returns.

Non-QM Loans · 8 min read

What Is a Qualified Mortgage? QM Rules in Plain English

By Mike Basti·October 14, 2026

A qualified mortgage, or QM, is a home loan that meets a set of federal safety standards written by the Consumer Financial Protection Bureau. It can’t have risky features like interest-only payments or a term longer than 30 years, its upfront fees are capped, and its pricing has to stay within set limits. Most conventional, FHA, VA and USDA loans are QMs. A non-QM loan is simply one that falls outside those rules, usually because it documents income a different way.

Where the QM rule came from

Before 2008, plenty of mortgages were approved without anyone checking whether the borrower could actually pay. Congress responded in the Dodd-Frank Act with the ability-to-repay rule: before making a mortgage, a lender has to make a reasonable, good-faith determination that you can repay it, using verified information about your income or assets and your debts.

The qualified mortgage is the safe lane inside that rule. If a loan meets the QM definition, the lender is presumed to have satisfied ability-to-repay. That legal protection is why most lenders prefer to make QM loans, and why the QM box shapes so much of what you see in the market.

What a loan has to look like to be a QM

The CFPB’s consumer guidance lists the core features. A qualified mortgage can’t include:

Interest-only periods, where you pay interest without reducing principal.
Negative amortization, where the balance can grow even though you’re making payments.
Balloon payments, with a narrow exception for certain small lenders.
A term longer than 30 years.

On top of that, two limits apply to most QMs:

Points and fees cap. For 2026, upfront points and fees can’t exceed 3% of the loan amount on loans of $137,958 or more. Smaller loans have their own dollar or percentage caps.
Pricing limit. Under the CFPB’s “General QM” definition, a first-lien loan of $137,958 or more generally can’t have an APR 2.25 percentage points or more above the average prime offer rate for a comparable loan. Smaller loans get higher thresholds.

You may have heard that QM loans are capped at a 43% debt-to-income ratio. That used to be the test. The CFPB replaced the hard 43% cap with the pricing limit above, though lenders still have to consider your DTI or residual income.

Which loans are QMs?

All FHA, VA and USDA loans count as qualified mortgages under their agencies’ own QM rules. Conventional loans sold to Fannie Mae and Freddie Mac, and many jumbo loans, are QMs when they meet the requirements above. In practice, if your income shows up cleanly on W-2s and tax returns, you’re almost certainly getting a QM loan.

QM vs non-QM: the real difference

A non-QM loan isn’t a “bad” loan or a subprime loan. The lender still has to verify that you can repay. It just does it with documents the QM box doesn’t fit well, or it includes a feature QM doesn’t allow.

	QM loan	Non-QM loan
Income proof	W-2s, pay stubs, tax returns	Bank statements, CPA P&L, assets, 1099s or rental income
Interest-only option	Not allowed	Available on many programs
Typical borrower	Salaried employee, clean returns	Self-employed, investor, retiree with assets, recent credit event
Down payment	As low as 3–3.5%	Usually 10–25%, program-dependent
Pricing	Lower	Varies with the market; often more competitive than borrowers expect

The most common reason people end up non-QM is self-employment. A business owner who writes off most of their income can look broke on a tax return and still have strong, steady cash flow. A non-QM bank statement loan or P&L loan reads that cash flow directly. For a side-by-side look, see QM vs non-QM loans.

Should you choose a QM or a non-QM loan?

If you qualify for a QM loan, price it first, but price non-QM too. In today’s market non-QM pricing has often been more competitive than borrowers expect. Non-QM makes sense when the QM route says no, or says yes to a much smaller loan than your real finances support. That usually means one of these:

Your tax returns understate your income because of legitimate write-offs.
You’re a real estate investor who wants to qualify on the property’s rent (DSCR loans).
You’re retired or between ventures with substantial savings but little monthly income (asset depletion).
You had a bankruptcy, foreclosure or short sale too recently for agency waiting periods.
You want an interest-only payment for cash-flow reasons.

As an independent mortgage broker, Save Financial can price both sides for the same file. Often the honest answer is a QM loan; when it isn’t, we compare non-QM options across 20+ wholesale lenders.

About this article: Save Financial is a California-licensed independent mortgage brokerage (NMLS #377740, DRE #01875766) in business since 2009, with offices in Newport Beach and Marina del Rey, serving all 58 counties. We have closed hundreds of non-QM loans and shop 20+ wholesale lenders to match you with the right program. This article is general education, not a loan offer or commitment to lend. For a real quote, apply online or call 949-379-5320.