Housing Counselor Certification (HUD) Practice Exam

When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered?

1. Income

2. Credit History

3. Capital

4. Employment Stability

The correct answer is: Capital

When a lender inquires about how much money a borrower has saved for a down payment on a home, they are specifically assessing the capital of the borrower. Capital refers to the assets and savings a borrower has available to contribute as a down payment, which can significantly influence the lender's decision. A larger down payment may indicate financial stability and responsibility, reducing the lender's risk by demonstrating that the borrower has invested their own money into the home purchase. Understanding a borrower's capital is essential, as it can also affect the types of mortgage products available, the interest rates offered, and the overall loan eligibility. For instance, substantial capital can lead to better loan terms, whereas a smaller down payment might necessitate private mortgage insurance (PMI), increasing the cost of borrowing. In this context, the other factors listed—income, credit history, and employment stability—are also important in the overall assessment of a borrower’s financial situation but do not directly relate to the question of how much money a borrower has saved for a down payment. They all contribute to a comprehensive understanding of the borrower's financial health but are distinct from the specific consideration of available capital for the down payment.