A determination of repayment ability must be based on all of the following, except:

• A. The borrower's income
• B. The equity the borrower already has in the dwelling
• C. The borrower's assets
• D. The borrower's debt-to-income ratio

Answer: (B)

When evaluating repayment ability, focus is on the borrower’s cash flow and capacity to make monthly payments. Income provides the stable source of funds to cover payments, assets show what resources are available to cover shortfalls or maintain reserves, and the debt-to-income ratio directly measures how large the debt burden is relative to income. The borrower’s equity in the dwelling, however, reflects how much of the home is already owned and affects collateral value or loan-to-value, not the borrower’s current ability to make monthly payments. So equity in the dwelling does not determine repayment ability, making it the exception.