41.1k views
1 vote
Which statement defines the term capacity? A. a borrower's willingness to repay a loan B. a borrower's ability to repay a loan C. a borrower's total assets

2 Answers

4 votes

Answer:

b

Explanation:

User HaggarTheHorrible
by
8.3k points
5 votes

Answer:

B. A borrower's ability to repay a loan

Explanation:

Capacity measures the borrower's ability to repay a loan by comparing income against recurring debts and assessing the borrower's debt-to-income (DTI) ratio. Lenders calculate DTI by adding together a borrower's total monthly debt payments and dividing that by the borrower's gross monthly income. The lower an applicant's DTI, the better the chance of qualifying for a new loan. Every lender is different, but many lenders prefer an applicant's DTI to be around 35% or less before approving an application for new financing.

User Josiah Keller
by
8.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories