What constitutes a "qualified mortgage"?

A qualified mortgage is defined as a loan that meets specific criteria established to protect consumers and minimize the risk of defaults. These criteria, which are outlined by regulations such as those from the Consumer Financial Protection Bureau (CFPB), ensure that loans are made with borrowers' ability to repay in mind. This includes assessing the borrower's income, assets, employment, credit history, and other factors that contribute to their repayment capacity.

Qualified mortgages typically have features designed to limit risky lending practices, such as restrictions on the types of fees that can be charged and limitations on how much a borrower's total monthly debt payments can exceed their monthly income. By being classified as a qualified mortgage, the loan also provides the lender with legal protections against borrower lawsuits challenging the lender's ability to assess a borrower's financial situation.

The other options do not accurately capture the essence of what constitutes a qualified mortgage. Some options might refer to loans with specific guarantees or features but do not fulfill the comprehensive criteria aimed at consumer protection and risk reduction that define a qualified mortgage.