California Real Estate Practice Exam

First time buyers are concerned as to how the lenders qualify prospective buyers regarding income. Lenders:

1. look at all income from both husband and wife, including incomes other than from wages and salaries

2. look at half of husband's income and half of wife's income

3. look at husband's and half of the wife's income

4. look at the income of only the husband, even if the wife also works

The correct answer is: look at all income from both husband and wife, including incomes other than from wages and salaries

The correct answer is based on the fact that lenders assess the financial capability of prospective borrowers by considering the total income of all applicants. In the case of married couples, this means evaluating all sources of income from both partners. Lenders do not limit their assessment to wages and salaries; they also include other forms of income, such as bonuses, commissions, rental income, or any other earnings that can contribute to the household’s financial picture. This comprehensive approach allows lenders to accurately gauge the ability of buyers to make monthly mortgage payments and demonstrates the borrower’s overall financial stability. By considering all income, lenders can provide a clearer and more holistic view of the couple's financial situation, which is essential in the qualifying process for a mortgage loan. Other options suggest limiting the income assessment to partial or single sources, which does not reflect the standard practices typically used by lenders when qualifying buyers.