What is generally required for a loan to be classified as a Qualified Mortgage?

A loan is classified as a Qualified Mortgage based on specific requirements designed to ensure that borrowers can afford their loans. One of the key characteristics of a Qualified Mortgage is the necessity for lenders to conduct thorough affordability assessments. This includes evaluating the borrower’s ability to repay the mortgage based on their financial situation, which helps to protect consumers from taking on loans they cannot manage.

This requirement aligns with the broader goal of maintaining responsible lending practices and reducing the risk of default. Affordability assessments typically consider the borrower’s income, debts, and other financial obligations, ensuring that they can meet their mortgage payments without undue financial strain.

The other options fail to capture the essence of what defines a Qualified Mortgage. For instance, a loan amount exceeding $1 million does not inherently qualify it as a Qualified Mortgage, as the classification is primarily based on the borrower's ability to repay. A focus solely on high credit scores neglects the need for broader affordability assessments, which are critical in determining eligibility for a Qualified Mortgage. Lastly, including multiple fees does not contribute to the classification of a loan as a Qualified Mortgage and may actually be viewed as a detriment if those fees increase the overall cost of the loan.