Which type of loan requires lenders to verify a borrower's income and creditworthiness?

The correct response is based on the fundamental practices followed in the lending industry. Generally, lenders are required to verify a borrower’s income and creditworthiness across all types of loans. This verification is crucial because it helps determine the borrower’s ability to repay the loan, ensuring that they are a responsible candidate for borrowing.

When lenders assess income, they look at various sources such as employment wages, self-employment income, and other financial assets. Evaluating creditworthiness involves reviewing the borrower’s credit history, including credit scores, past debts, and repayment behaviors. This thorough scrutiny is essential for maintaining lending standards and minimizing the risk of default.

In the context of the various loan options mentioned, all types of loans, including high-cost loans, conventional loans, and subprime loans, necessitate this verification process. While certain loans may have unique criteria or additional requirements, the baseline requirement of verifying income and creditworthiness is consistent across the board. This ensures responsible lending practices are upheld within the industry, ultimately protecting both the lender and the borrower.