Finance
Under the Dodd-Frank Act, a 'Qualified Mortgage' (QM) in West Virginia may NOT include:
AA fixed interest rate for the loan term
BNegative amortization, interest-only payments, or balloon payments (with limited exceptions)✓ Correct
CA down payment requirement
DA debt-to-income ratio of 43% or less
Explanation
A Qualified Mortgage (QM) provides lenders with a safe harbor from ability-to-repay liability. QMs generally cannot include negative amortization, interest-only payments, or balloon payments (with exceptions for small creditors), and the DTI ratio must generally not exceed 43%.
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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.
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