In which type of Qualified Mortgage would a lender need to enhance underwriting standards for a DTI over 43%?

A Temporary Qualified Mortgage (QM) allows lenders some flexibility when it comes to debt-to-income (DTI) ratios, particularly in instances where the DTI may exceed the standard threshold of 43%. This type of mortgage was established primarily to cater to transitional economic conditions, such as during a financial crisis or for borrowers with unique circumstances.

In the context of a DTI over 43%, lenders are required to adhere to stricter underwriting standards to mitigate risk. This might involve compensating factors that demonstrate the borrower’s ability to repay the loan, such as a higher credit score, significant cash reserves, or a history of making similar payments on time.

The other types of Qualified Mortgages have more rigid guidelines regarding DTI ratios. General QM, for instance, necessitates that DTI ratios do not surpass 43% without exception. Refinance QM focuses on specific refinancing conditions and typically requires borrowers to meet standard QM criteria. Investment QM pertains to loans for investment properties and similarly adheres to strict DTI limits. Thus, a Temporary QM stands out by allowing for those enhanced underwriting standards when the DTI exceeds the conventional cap.