Humber/Ontario Real Estate Course 3 Exam Practice

Which factor significantly impacts loan eligibility for purchasing a property?

1. The historical value of the estate.

2. The employment history of the buyer.

3. The credit score and financial history of the buyer.

4. The market sentiment at the time of the purchase.

5. The projected future value of the property.

6. The interpersonal relationship with the lending officer.

The correct answer is: The credit score and financial history of the buyer.

The credit score and financial history of the buyer are critical factors that significantly impact loan eligibility when purchasing a property. Lenders assess these components to evaluate the risk of lending money to a potential borrower. A strong credit score demonstrates to lenders that the borrower has a history of responsible credit use and a reliable repayment track record. This often results in better loan terms, including lower interest rates and higher approval chances. Financial history goes beyond just credit scores; it includes income stability, debt-to-income ratio, and past financial behavior. Lenders use this information to judge whether a borrower can manage monthly mortgage payments alongside their existing financial obligations. A favorable credit score combined with solid financial history signals to lenders that the borrower is likely to repay the loan, which is crucial for loan approval. In contrast, while other factors like historical value of the estate, employment history, and market sentiment may be relevant in various contexts, they do not hold the same significance in determining an individual’s eligibility for a loan. The interpersonal relationship with a lending officer can also play a role but is secondary to quantifiable financial metrics.