What is the difference between a qualified mortgage and a non qualified mortgage?

Qualified vs Non‑Qualified Mortgage: Understanding the Key Differences

A qualified mortgage (QM) strictly adheres to CFPB, Fannie Mae, and Freddie Mac guidelines—capping debt‑to‑income ratios, prohibiting risky features, and requiring full documentation—making it easy for lenders to sell on the secondary market. In contrast, a non‑qualified mortgage (non‑QM) is funded privately—often by hedge funds, insurance firms, or private investors—and bypasses some traditional rules, offering more flexibility through alternative income verification like bank‑statement analysis for self‑employed borrowers. While non‑QMs typically carry slightly higher interest rates due to reduced resale liquidity, they serve as an ideal middle ground between QMs and hard‑money loans by providing faster closings, interest‑only terms, 40‑year options, and tailored solutions for those outside conventional criteria.

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