What standard does QM seek to ensure about loan payments?

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Qualified Mortgage standards focus on making sure loan payments are affordable and predictable for borrowers. This is achieved by ensuring the loan is fully amortizing, with stable monthly payments that stay the same or follow a predictable schedule. When a loan is fully amortizing, every payment reduces both interest and principal, ending with the loan paid off at the end of the term. Stable, monthly payments help borrowers budget and lessen the risk of payment shocks that can lead to default.

Options that describe payments that are interest-only with a balloon, or that vary or adjust annually with an index, don’t fit QM because they introduce payment uncertainty and potential large future payments. The emphasis of QM is to prevent those kinds of unpredictable or sudden changes by keeping payments steady and affordable over the life of the loan.