Date of Last Revision: August 8, 2026

The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requires a creditor to make a reasonable, good faith determination of a consumer’s ability to repay a residential mortgage loan according to its terms. The ATR/QM Rule also defines several categories of “qualified mortgage” loans, which obtain certain protections from liability.

To see the specific debt-to-income ratio requirement per loan type, see our DTI page

What are the eight ATR underwriting factors the lender must consider and verify under the rule?

1. Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan

2. Current employment status (if you rely on employment income when assessing the consumer’s ability to repay)

3. Monthly mortgage payment for this loan. The lender will calculate this using the introductory or fully indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially

4. Monthly payment on any simultaneous loans secured by the same property

5. Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent

6. Debts, alimony, and child-support obligations

7. Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income

8. Credit history The rule does not preclude the lender from considering additional factors, but the lender must consider at least these eight factors.

How do lending organizations verifies information that is considered when using reliable third-party records?

The lending organization must verify the information you rely on using reasonably reliable third-party records. For example, the lender generally cannot rely on what consumers orally tell you about their income. The lender must verify a consumer’s income using documents such as W-2s or payroll statements.

While the lender must follow the reasonably reliable third-party standard, the rule provides for a wide variety of sources that may help the lender to verify the information the lender to rely on to determine ATR.

There are a wide variety of documents and sources of information the lending organization can use as you determine ATR, and the lending organization has significant flexibility in how the lender will verify each of the eight factors. For example:

• In addition to a W-2 or payroll statement, the lender may verify income using tax returns, bank statements, receipts from check cashing or funds-transfer services, benefits program documentation, or records from an employer. Copies of tax-return transcripts or payroll statements can be obtained directly from the consumer or from a service provider, and need not be obtained directly from a government agency or employer, as long as the records are reasonably reliable and specific to the individual consumer.

• If a consumer has more income than, in the lender’s reasonable and good-faith judgment, is needed to repay the loan, the lending organization does not have to verify the extra income. For example, if a consumer has both a full-time and a part-time job and the lender reasonably determine that income from the full-time job is enough for the consumer to be able to repay the loan, The lender does not have to verify income from the part-time job.

• The lending organization can document a consumer’s employment status by calling the employer and getting oral verification, as long as you maintain a record of the information you received on the call.

• The lending organization can use a credit report to verify a consumer’s debt obligations; the lender does not need to obtain individual statements for every debt.

• If a consumer does not have a credit history from a credit bureau, the lender can choose to verify credit history using documents that show nontraditional credit references, such as rental payment history or utility payments.

Types of Employment

The lending organization can consider and verify many types of employment to use in making your ATR determination, including:

• Full-time

• Part-time

• Seasonal

• Irregular

• Military

• Self-employment

Considering the characteristics of the consumer’s type of employment. A wheat farmer has a different income stream than a store clerk. The lender can verify the consumer’s employment by calling the employer and obtaining oral verification, so long as the lender makes a written record memorializing the verification.

Sources of credit history information

A credit report generally is considered a reasonably reliable third-party record for verification purposes

While the rule requires that the lender examines the credit history, it does not prescribe a particular type of credit history to consider or prescribe specifically how the lender should judge the information received. The lender’s consideration of credit history must be reasonable in light of the facts and circumstances.

• Credit history might include information about:

• Number and age of credit lines

• Payment history

• Judgments

• Number and age of credit lines

• Payment history

• Judgments

If the lender knows, or has a reason to know, that the information on a consumer’s credit report is inaccurate, the lender can ignore it. For example, there might be a fraud alert or a dispute on the credit report, or the consumer may present other evidence that contradicts the credit report. In those cases, you may choose to disregard the inaccurate or disputed items. If the consumer lists a debt obligation that does not show up on the credit report, The lender may accept the consumer’s statement about the existence and amount of the obligation without further verification.

There are four types of Qualified Mortgages under the rule..

Two types, the General and Temporary QM definitions, can be originated by all creditors. Two other types, Small Creditor and Balloon-Payment QMs, can only be originated by small creditors.

The QM requirements generally focus on prohibiting certain risky features and practices, such as negative amortization and interest-only periods and loan terms longer than 30 years.

In addition, for all types of QMs, points and fees generally may not exceed 3 percent of the total loan amount, but higher thresholds are provided for loans below $100,000.

The type of presumption of compliance for a QM depends on whether it is higher-priced. Qualified Mortgages under the General and Temporary definitions are considered higher-priced if they have an APR that exceeds the APOR by 1.5 percentage points or more for first-lien loans and 3.5 percentage points or more for subordinate-lien loans.

If a loan that is not higher-priced satisfies the QM criteria, a court will conclusively presume that you complied with the ATR rule.

If a higher-priced loan meets the QM criteria, a court will presume it complies with the ATR requirements, but the consumer may rebut the presumption.

What makes a QM loan higher-priced?

A Qualified Mortgage under the General or Temporary definition is higher-priced if:

• It is a first-lien mortgage for which, at the time the interest rate on the loan was set, the APR was 1.5 percentage points or more over the Average Prime Offer Rate (APOR).

• It is a subordinate-lien mortgage with an APR that, when the interest rate was set, exceeded the APOR by 3.5 percentage points or more.

• For example, if the APOR is 5 percent at the time when the interest rate on a mortgage is set, then a first-lien mortgage is higher-priced if it has an APR of 6.5 percent or more.

A Small Creditor or Balloon-Payment QM is higher-priced if:

• It has an APR that, when the interest rate was set, exceeded the APOR by 3.5 percentage points or more, for both first-lien and subordinate-lien mortgages.

For example, if the APOR is 5 percent at the time when the interest rate on a mortgage is set, a mortgage that is a Small Creditor Qualified Mortgage is higher-priced if it has an APR of 8.5 percent or more, regardless of whether it is first- or subordinate-lien loan.

Are there different types of QMs?

There are four types of QMs. Two types of QMs, the General and Temporary QM definitions, can be originated by any creditor, regardless of the creditor’s size. Two additional types of QMs, Small Creditor and Balloon-Payment QMs, can be originated only by small creditors.

There are four types of QMs. Two types of QMs, the General and Temporary QM definitions, can be originated by any creditor, regardless of the creditor’s size. Two additional types of QMs, Small Creditor and Balloon-Payment QMs, can be originated only by small creditors.

Some requirements are common across all four types of QM. These requirements include:

• A prohibition on negative amortization or interest-only payments

• A prohibition on loan terms in excess of 30 years

• Limitations on points and fees: The threshold is generally 3 percent of the loan balance, but larger amounts are allowed for loans under $100,000