Final answer:
Lending institutions typically evaluate income sources, conduct a credit check, require a cosigner, and ask for collateral when determining eligibility for a home loan. These measures help them assess and mitigate the risk of lending.
Step-by-step explanation:
When determining your eligibility for a home loan, a lending institution may consider several factors to assess the risk involved in lending to you. These factors include:
- Your income sources to gauge your ability to repay the loan.
- A credit check to evaluate your past borrowing behavior and creditworthiness.
- The presence of a cosigner, if necessary, to provide an additional guarantee that the loan will be repaid.
- Collateral, such as property or equipment, which the bank can seize and sell if the loan is not repaid.
Each of these factors helps the lender to mitigate the risks associated with providing a loan by providing a clearer picture of the borrower's financial stability and reliability.