Affiliate Broker Tennessee (TN PSI) National Practice Exam `

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Study for the Affiliate Broker Tennessee National Exam. Practice with flashcards and multiple choice questions, with hints and explanations. Prepare well for your licensing exam!

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Which factors does the underwriter consider when reviewing a mortgage loan application?

Income, qualifications, and equity
Credit, capacity, and collateral
Employment history, credit score, and assets
Age, job stability, and market trends

The correct answer is: Credit, capacity, and collateral

The correct answer emphasizes three critical components that underwriters focus on when reviewing a mortgage loan application: credit, capacity, and collateral. Credit refers to the borrower's credit history and credit score, which are essential indicators of their reliability in repaying debt. A strong credit profile shows the lender that the borrower has managed previous debts responsibly. Capacity examines the borrower's ability to repay the loan, taking into account their income, expenses, and overall financial situation. This assessment helps the lender understand whether the borrower's income can adequately cover monthly payments alongside their other financial obligations. Collateral pertains to the property being financed. The underwriter evaluates its value, which secures the loan for the lender. If the borrower fails to repay the loan, the property can be sold to recover losses, making it a crucial factor in the underwriting process. By analyzing these three elements, underwriters can make informed decisions about the risk involved in approving a mortgage loan application.