To be considered a Qualified Mortgage (QM), a first-lien loan's APR cannot exceed what?

To determine if a first-lien loan qualifies as a Qualified Mortgage (QM), it's essential to understand the specific criteria set by the Consumer Financial Protection Bureau (CFPB). The correct answer focuses on the limitation of the loan's annual percentage rate (APR) in relation to the average prime offer rate (APOR).

The APOR serves as a benchmark that reflects the interest rates offered to borrowers with good credit. For a mortgage to be classified as a Qualified Mortgage, its APR must not exceed the APOR by a certain percentage. This threshold helps ensure that the loans categorized as QMs are generally more affordable and carry less risk for borrowers, reinforcing the safety nets that regulation aims to provide.

By comparing the loan’s APR to the APOR, the regulations aim to set a standard that protects consumers from excessively high-interest rates while still allowing lenders to offer reasonable products. This measure contributes to the overall goal of reducing the likelihood of borrower default, enhancing the stability of the financial market.

Other options, while related to lending and borrowing scenarios, are not the specific benchmarks crucial for defining a QM under the Truth in Lending regulations. This reinforces the importance of the APOR as a key factor in this specific context.