A Qualified Mortgage (QM) assumes that which condition has been met?

A Qualified Mortgage (QM) is designed to ensure that borrowers have a reasonable ability to repay their loans. This is a critical requirement of the QM framework, which was established to protect consumers from high-risk lending practices and to promote sustainable homeownership. The ability to repay standard requires that lenders evaluate borrowers based on their income, employment status, credit history, and other financial obligations before approving a loan.

By meeting the ability to repay condition, a QM is inherently designed to mitigate default risks and ensure that borrowers are not placed in financial situations they cannot handle. This is fundamentally about borrower protection and contributing to the overall stability of the housing market. Other factors, such as collateral sufficiency, strong credit, and the absence of interest-only periods, may contribute to the attractiveness of the loan, but they do not satisfy the primary requirement set forth for a loan to be classified as a Qualified Mortgage.