Short answer: under federal rules, a mortgage is not a qualified mortgage if its points and fees go over a cap. For a loan amount of $137,958 or more in 2026, the cap is 3 percent of the total loan amount; smaller loans have higher caps, set as a dollar amount or a percentage. Some charges are left out of the count, including up to two bona fide discount points when the rate meets a test. This page covers federal law only; other rules may apply where you live. It is general information, not legal or financial advice.
Why the cap matters
A lender must make a reasonable, good faith determination that you can repay a closed-end mortgage secured by a dwelling (12 CFR 1026.43(c)(1), eCFR, text up to date as of October 28, 2026, read October 30, 2026). A qualified mortgage is presumed to meet that rule. The CFPB says a qualified mortgage comes with limits on certain upfront points and fees, that the limits depend on the size of the loan, that not all charges, such as FHA insurance premiums, count toward the limit, and that if the points and fees go over the limit, the loan cannot be a qualified mortgage (CFPB, last reviewed January 2, 2025, read October 30, 2026; this page may be out of date). See the mortgage ability-to-repay rule.
The caps for 2026
The rule sets base caps (3 percent for loans of $100,000 or more, for example) and adjusts the dollar amounts, including the loan amount tiers, each January 1 by the change in the Consumer Price Index (12 CFR 1026.43(e)(3)(i)-(ii)). The 2026 figures, reflecting a 2.3 percent increase, are in the official comments (Supplement I, comment 43(e)(3)(ii)-1.xii, eCFR) and in the CFPB’s final rule (Federal Register, December 15, 2025). As of October 30, 2026, we found no published 2027 figures; check the official comments for the year your loan closes. The last two columns are only for the math and assume the total loan amount equals the loan amount.
| Loan amount (2026) | Points and fees may not exceed | Example loan amount | Example cap |
|---|---|---|---|
| $137,958 or more | 3% of the total loan amount | $300,000 | $9,000 |
| $82,775 to less than $137,958 | $4,139 | $100,000 | $4,139 |
| $27,592 to less than $82,775 | 5% of the total loan amount | $50,000 | $2,500 |
| $17,245 to less than $27,592 | $1,380 | $20,000 | $1,380 |
| Less than $17,245 | 8% of the total loan amount | $15,000 | $1,200 |
The tier comes from the loan amount on the note; for tiers with a percentage, the percentage is applied to the total loan amount (Supplement I, comment 43(e)(3)(i)-2). The total loan amount is the amount financed minus certain financed charges that count as points and fees, such as financed credit insurance premiums (12 CFR 1026.32(b)(4)(i), eCFR). The general qualified mortgage definition includes the cap (1026.43(e)(2)(iii)).
What counts as points and fees
For a closed-end loan, points and fees are charges known at or before closing, and include (12 CFR 1026.32(b)(1)):
- Finance charges such as origination and underwriting fees, with the exclusions below ((b)(1)(i)).
- Compensation paid to a loan originator for the loan, with exceptions such as pay from a creditor to its own employee ((b)(1)(ii)).
- Fees such as title, appraisal and credit report fees, unless the fee is reasonable, the creditor gets no compensation from it, and it is not paid to the creditor’s affiliate ((b)(1)(iii)).
- Credit life, credit disability and similar insurance premiums, and debt cancellation fees, paid at or before closing ((b)(1)(iv)).
- The maximum prepayment penalty the loan allows, and any prepayment penalty you pay to refinance with the same holder or servicer ((b)(1)(v)-(vi)).
Left out of the finance charge part are interest; premiums for a government agency program that insures or guarantees the loan, such as FHA mortgage insurance; some private mortgage insurance premiums; bona fide third-party charges that the creditor, loan originator or an affiliate does not keep; and some bona fide discount points ((b)(1)(i)(A)-(F)).
Bona fide discount points
A bona fide discount point is 1 percent of the loan amount that you pay to lower the interest rate, by an amount consistent with established industry practices (12 CFR 1026.32(b)(3)(i)). Up to two of them are left out if the interest rate without the discount is no more than 1 percentage point above the average prime offer rate for a comparable loan; if none are left out that way, up to one is left out if that rate is no more than 2 points above it (1026.32(b)(1)(i)(E)-(F)). The official comments say the average prime offer rate used is the one in effect on the date the discounted rate is set (comment 32(b)(1)(i)(E)-2). See the break-even point on mortgage discount points and the CFPB answer on points and lender credits.
Example: the same fees, three rates
This example is only for the math, with example fees and rates, not terms from any lender or a current average prime offer rate. The loan amount is $300,000 and equals the total loan amount, so the cap is 3 percent, or $9,000. Fees counted: an origination fee of $3,000 and an underwriting fee of $1,200, $4,200 in all. A reasonable $600 appraisal fee paid to an unaffiliated appraiser, with no compensation to the creditor, is left out. You pay 2 discount points ($6,000, or $3,000 each), and the example average prime offer rate is 6.25%.
| Item | Case 1 | Case 2 | Case 3 |
|---|---|---|---|
| Rate before the discount | 7.00% | 7.75% | 8.50% |
| Points above the example average prime offer rate | 0.75 | 1.50 | 2.25 |
| Discount points left out | 2 | 1 | 0 |
| Points and fees counted | $4,200 + $3,000 × 0 = $4,200 | $4,200 + $3,000 × 1 = $7,200 | $4,200 + $3,000 × 2 = $10,200 |
| Against the $9,000 cap | Within, $4,800 under | Within, $1,800 under | Over by $1,200 |
In Case 3, the same fees put the loan over the cap only because no discount points can be left out, so the loan could not be a qualified mortgage under the general definition. It would still be below the high-cost points and fees trigger for this loan, 5 percent of the total loan amount, or $15,000 (12 CFR 1026.32(a)(1)(ii)(A)).
If a loan goes over the cap
A loan whose points and fees go over the cap is not a qualified mortgage (12 CFR 1026.43(e)(3)(i)). It can still be made, but without the presumption, and the lender must still make the good faith repayment determination in 1026.43(c). The rule allowed a lender to fix an overage by refunding it with interest within 210 days only for loans closed on or before January 10, 2021 (1026.43(e)(3)(iii)-(iv)). Higher points and fees can also make a loan a high-cost mortgage: for 2026, when they go over 5 percent of the total loan amount for a loan amount of $27,592 or more, or the lesser of 8 percent or $1,380 for a smaller loan (1026.32(a)(1)(ii); Supplement I, comments 32(a)(1)(ii)-1 and -3). See high-cost home loan protections.
Questions to ask the lender
- Is this loan a qualified mortgage, and under which definition?
- What are the total points and fees you counted, and what is the cap for my loan amount?
- Are any discount points left out of the count, and what rate without the discount did you use?
- How much does each discount point lower my rate?
- Which fees go to you or an affiliate, and which go to unaffiliated third parties?
Checklist
- Find your loan amount and the cap for its tier in the year you close.
- List the origination charges and discount points on your Loan Estimate.
- Ask in writing how the lender counted points and fees.
- Compare the rate cut from each point with the break-even time.
- Keep the Loan Estimate and Closing Disclosure.
You can submit a complaint at consumerfinance.gov/complaint.
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Sources
- eCFR: 12 CFR 1026.43, Minimum standards for transactions secured by a dwelling (Regulation Z), current text up to date as of October 28, 2026
- eCFR: 12 CFR 1026.32, Requirements for high-cost mortgages (Regulation Z), current text up to date as of October 28, 2026
- eCFR: Supplement I to Part 1026, Official Interpretations (Regulation Z), current text up to date as of October 28, 2026
- Federal Register (GovInfo): Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages), final rule, December 15, 2025, effective January 1, 2026 (FR Doc. 2025-22773)
- CFPB: What is a Qualified Mortgage? (last reviewed January 2, 2025)
- CFPB: How should I use lender credits and points (also called discount points)? (reviewed October 19, 2023)
- CFPB: Submit a complaint
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.