What determines a borrower’s creditworthiness?

A borrower's creditworthiness is primarily determined by their debt-to-income ratio and credit score. The debt-to-income ratio reflects the percentage of a borrower's monthly income that goes toward paying debts. Lenders use this metric to assess whether the borrower is likely to manage additional debt responsibly, taking into account their existing financial obligations.

The credit score is another crucial element, as it summarizes the borrower’s credit history, demonstrating their reliability in repaying debts based on past behavior. A higher credit score typically indicates a strong credit profile, leading lenders to consider the borrower less risky, while a lower score may raise red flags about potential repayment issues.

Together, these two factors provide a comprehensive view of a borrower's financial health and ability to manage loans, which is why they are key components in determining creditworthiness. Other choices focus on aspects that may influence lending decisions but do not directly assess the overall creditworthiness of the borrower. For example, job stability and income level indicate potential earnings but do not reflect past credit behavior. Property value and down payment amount relate more to the security and risk of the specific loan rather than the borrower’s creditworthiness. Loan terms and interest rates are determined based on an assessment of creditworthiness rather than serving as determinants themselves.