Finance
Under the Equal Credit Opportunity Act (ECOA), a lender may NOT deny a mortgage based on:
AThe borrower's credit score
BThe borrower's debt-to-income ratio
CThe borrower's race, sex, religion, or national origin✓ Correct
DThe borrower's employment history
Explanation
ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Lenders may consider creditworthiness factors but not these protected characteristics.
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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.
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.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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