Which of the following is a key risk factor that lenders evaluate more heavily in construction loans compared to traditional mortgages?
Correct Answer
C) Contractor's experience and financial stability
Construction loans involve additional risk related to project completion. Lenders must evaluate the contractor's track record, financial stability, licensing, and insurance to ensure the project will be completed as planned.
Why This Is the Correct Answer
Construction loans involve additional risk related to project completion. Lenders must evaluate the contractor's track record, financial stability, licensing, and insurance to ensure the project will be completed as planned.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
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Previous Question
A borrower has an ARM with a current rate of 4% that could adjust to 8% next year. They want to refinance to a 30-year fixed rate at 5.5%. How should this be evaluated for tangible net benefit?
Next Question
For a construction-to-permanent loan, the permanent financing phase interest rate is typically determined by: