For a general QM, the qualifying rate for a borrower is based on the highest rate within the first how many years of the loan?

In the context of Qualified Mortgages (QMs), particularly general Qualified Mortgages, the qualifying rate is determined based on the highest interest rate applicable during the first five years of the loan. This means that lenders must assess the borrower’s ability to make payments based on this maximum rate instead of a lower introductory rate, if applicable. This safety measure is designed to ensure that borrowers are capable of handling potential payment increases that may occur after the initial period. By basing the assessment on the highest rate within the first five years, it addresses the risk of payment shocks that could arise when a loan resets or adjusts to a higher rate after an introductory period. Thus, the five-year benchmark is critical for lenders assessing risk and for borrowers understanding their long-term obligations.