The housing crisis of 2008 left a gross number of financial issues for Americans to tangle with, and veterans may be wondering whether or not VA has done their part to prevent similar misfortune from falling on our nation's finest. Fortunately, they have. Qualified Mortgage (QM) regulations, already considered a secure type of loan, have been updated to provide even greater stability.
To begin with, according to the Huffington Post, Qualified Mortgages cannot include the following:
- A period where the borrower pays only interest on the loan and nothing toward the principal, known as an interest-only loan
- Something known as "negative amortization," which occurs when your payment fails to cover all of the interest due, leading your principal balance to actually increase over time
- Balloon payments, where you're required to pay off the loan in one lump sum payment after a certain number of years
- Loan terms beyond 30 years
One of the lynchpins of Qualified Mortgages is an individual's ability to repay the loan. All the financial jargon and finessing in the world will never have greater importance than that one variable; either a borrower is in financial shape to pay off the loan or they're not. However, with an economy as complex as ours, deciding how to measure one's ability to pay a loan can be a bit tricky. At the core of any QM are eight pillars that signify an individual is financially fit for the loan:
- Current income or assets
- Current employment status
- Credit history
- Monthly mortgage payment
- Monthly payments on other mortgages
- Monthly payments for mortgage-related expenses, such as property taxes
- Current debt obligations, including things like child support or alimony
- Your monthly debt-to-income (DTI) ratio
If this all seems a little dizzying to wrap your head around, don't worry: every aspect of the QM is designed to ensure that borrowers are protected and will be able to fully repay the loan in a reasonable period of time. If you are approved for a VA Qualified Mortgage, you can rest assured that a very thorough process is in place to secure you against future financial woe.