Which loan characteristic is typically not allowed in QM but common in Non-QM?

Prepare for the Qualified and Non-Qualified Mortgage Test with comprehensive flashcards and multiple-choice questions. Ensure you understand every concept with detailed hints and explanations.

A balloon payment is the feature that typically isn’t allowed in a Qualified Mortgage because QM requires the loan to be fully amortizing with regular, level payments over the term. A balloon payment creates a large lump-sum due at the end, which disrupts full amortization and can lead to payment shock if the borrower can’t refinance or pay the final balance. That risk is exactly the kind of scenario QM rules aim to avoid, so this feature is kept out of QM and is more commonly found in Non-QM loans.

In contrast, fully amortizing loans and fixed-rate loans fit QM requirements because their payments are predictable and the loan is paid off by the end of the term. A balloon payment loan is a distinct characteristic that signals a Non-QM structure, where lenders may accept higher risk or different underwriting criteria.