What is the maximum loan term allowed for Qualified Mortgages?

The maximum loan term allowed for Qualified Mortgages is 30 years. This guideline, established under the Dodd-Frank Act, is designed to ensure that loans are made based on the borrower's ability to repay and to protect borrowers from excessively long debt obligations that could lead to financial distress.

Qualified Mortgages, or QM loans, tend to have more borrower protection features, such as limits on points and fees, and restrictions on prepayment penalties. The 30-year term is significant because it allows for a more manageable monthly payment over a longer period, making homeownership accessible for a larger segment of the population. Loan terms exceeding 30 years can lead to problems in assessing borrower creditworthiness and repayment ability, which is why the regulation specifically caps the duration at this point.

Other term lengths, while potentially suitable for specific financing situations, do not align with the QM standards that have been established for stability and consumer protection in the mortgage market.