Question

What are the three steps of a loan assessment based on income principles?

a) Verification, calculation, documentation
b) Application, approval, disbursement
c) Analysis, negotiation, confirmation
d) a and b only

Answer 1

The three steps of a loan assessment based on income principles are verification, calculation, and documentation.

Step-by-step explanation:

The three steps of a loan assessment based on income principles are:

1. Verification: This involves verifying the income sources stated by the prospective borrower. The bank may request documents such as pay stubs, tax returns, or bank statements as proof of income.
2. Calculation: The bank calculates the borrower's debt-to-income ratio to determine their ability to repay the loan. This is done by comparing the borrower's total debt obligations to their income.
3. Documentation: The bank requires the borrower to provide necessary documentation such as identification, employment history, and credit history to complete the loan assessment process.