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

• A. The borrower's income
• B. The borrower's employment status
• C. The equity the borrower already has in the dwelling (correct)
• D. The borrower's monthly debt payments

Answer: (C)

Repayment ability is about the borrower’s capacity to make loan payments from their ongoing cash flow. That comes from income or expected income, the stability of the employment situation, and current monthly debt obligations (which feed into the debt-to-income ratio). Equity in the dwelling, on the other hand, reflects how much of the property the borrower already owns and affects collateral risk and loan-to-value, not the borrower’s ability to pay monthly obligations. So equity doesn’t determine repayment ability, which is why it is the correct answer for the item that doesn’t belong.