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Introduction
This topic contains information about the ATR Rule and the Qualify Mortgage, including:
路What鈥檚 the ATR rule锛
路 Loan types exempted from qualifying mortgages
What鈥s the ATR Rule?
The ability-to-repay rule is a reasonable and good faith determination that most mortgage lenders are required to make sure that you are able to pay back the loan.
Under the rule, lenders must generally find out, consider, and document a borrower鈥檚 income, assets, employment, credit history and monthly expenses. Lenders cannot just use an introductory or 鈥渢easer鈥 rate to figure out whether a borrower can repay a loan. For example, if a mortgage has a low interest rate which goes up in later years, the lender has to make a reasonable effort to figure out if the borrower can pay the higher interest rate too.
One way that a lender can follow the ability-to-repay rule is by making a 鈥淨ualified Mortgage鈥.
Loan Types exempt from the Qualify Mortgage
路 An 鈥Interest-only鈥 period means a period when you pay only the interest without paying down the principal - the amount of money you borrowed.
路 鈥Negative amortization鈥 can allow your loan principal to increase over time, even though you鈥檙e making payments.
路 鈥Balloon Payments鈥 are larger-than-usual payments at the end of a loan term. The loan term is the length of time over which your loan should be paid back. Note that balloon payments are allowed under certain conditions for loans made by small lenders.
路 Loan terms that are longer than 30 years.
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