Finance
Under the Dodd-Frank Act, a Qualified Mortgage (QM) generally prohibits:
AFixed interest rates
BLoans with debt-to-income ratios above 43%✓ Correct
CDown payments of less than 20%
DAdjustable rate features
Explanation
Qualified Mortgages under Dodd-Frank generally require that the borrower's total debt-to-income ratio not exceed 43%. QMs also prohibit certain risky loan features such as interest-only periods and negative amortization.
People Also Study
Related Ohio Questions
- Under the Dodd-Frank Act, an Ohio lender making a 'qualified mortgage' (QM) must ensure the borrower has:Finance
- What is the debt-to-income (DTI) ratio used for in mortgage underwriting?Finance
- A borrower's monthly principal and interest payment is $1,250. Their gross monthly income is $5,000. What is their front-end (housing) debt-to-income ratio?Real Estate Math
- A mortgage that allows the borrower to borrow additional funds up to the original loan amount after partial repayment is called a(n):Finance
- What is the purpose of the Qualified Mortgage (QM) rule under Dodd-Frank?Finance
Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Study This Topic
Practice More Ohio Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Ohio Quiz →