What is the ability-to-repay rule?
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The ability-to-repay rule prohibits most lenders from giving you a mortgage unless they have made a reasonable and good faith determination that you are able to pay back the loan.
Under the rule, lenders must generally find out, consider, and document a borrower’s income, assets, employment, credit history, and monthly expenses. Lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan. For example, if a mortgage has a low interest rate that 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 a lender can follow the ability-to-repay rule is by making a "Qualified Mortgage."