Loan Officer Practice Exam

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What document identifies net worth by itemizing assets and liabilities for a self-employed person applying for a mortgage loan?

credit report
financial statements
will
tax returns

The correct answer is: financial statements

The document that identifies net worth by itemizing assets and liabilities for a self-employed person applying for a mortgage loan is financial statements. Financial statements provide a detailed overview of an individual's financial situation, including their income, expenses, assets (such as properties, bank accounts, and investments), and liabilities (like debts and loans). This comprehensive snapshot helps lenders accurately assess the financial health of the borrower, enabling them to make informed decisions regarding the mortgage application. While a credit report offers insights into a person's credit history and utilization, it does not itemize specific assets and liabilities. Will documents pertain to estate planning and do not provide any financial information relevant to mortgage eligibility. Tax returns contain income details and can support a financial profile, but they do not provide a complete picture of a person's net worth, as they do not detail all assets and liabilities comprehensively like financial statements do.