Is a no-doc loan allowed under QM?

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Multiple Choice

Is a no-doc loan allowed under QM?

Under the Ability-to-Repay rule, lenders must verify a borrower’s income, assets, employment, and debts to determine whether they can repay the loan. A loan with no income documentation cannot demonstrate that ability, so it would not meet the Qualified Mortgage requirements. QM loans must also satisfy other standards—such as limits on points and fees, a 30-year amortization, no negative amortization or balloon payments, and typically a debt-to-income cap around 43%. Because no-doc loans fail the required documentation to prove repayment ability and meet these risk standards, they are not considered QM. There are no established exceptions under QM that permit no-doc loans, such as pilot programs or special approvals.

Under the Ability-to-Repay rule, lenders must verify a borrower’s income, assets, employment, and debts to determine whether they can repay the loan. A loan with no income documentation cannot demonstrate that ability, so it would not meet the Qualified Mortgage requirements. QM loans must also satisfy other standards—such as limits on points and fees, a 30-year amortization, no negative amortization or balloon payments, and typically a debt-to-income cap around 43%. Because no-doc loans fail the required documentation to prove repayment ability and meet these risk standards, they are not considered QM. There are no established exceptions under QM that permit no-doc loans, such as pilot programs or special approvals.

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