Finance
In Hawaii, what is a 'borrower's credit score' (FICO score) and how does it affect mortgage terms?
AA. A score assigned by the lender based on their internal criteria only
BB. A numerical rating of creditworthiness based on payment history and other factors; higher scores qualify for better rates and terms✓ Correct
CC. A score based solely on income and assets, not credit history
DD. A government-assigned number required for all federal loans
Explanation
FICO scores (300-850) measure creditworthiness based on payment history, credit utilization, length of credit history, and other factors. Higher scores result in better interest rates and more favorable loan terms.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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