Ability To Pay
The ability to pay is a self-explanatory term used in Real Estate to determine if the Home Buyer has the financial health to honor a deal.
Mortgage Lenders can't afford to lend out money to whoever they like; they need to know if the borrower is able to pay the loan back. There are several calculations done to assert a home buyer's (or a borrower's) ability to pay, and the debt-to-income ratio calculation and the credit score evaluation are the most famous ones.
In many ways, it was the lack of attention to this economic principle on the Lender's part that led the country and, especially, the business into the "Great Recession" of 2008. Both lenders and borrowers didn't care about the ability to pay and suddenly no one was paying for the loans anymore. Lots of foreclosed homes and the rest is History... and we hope it stays like this: History!
Real Estate Tips:
Test your ability to learn by continuingly searching terms on our Real Estate Glossary!
Popular Real Estate Terms
Local zoning law or private limitation on how far in feet a structure might be situated from the curb or other appropriate marker. ...
Lease that incorporates increases in agreed-on payments over the term of the lease contract. For example, a particular step-up lease may require that the lessee pay a 10% increase each year ...
A fixed marker or monument, either erected or naturally occurring, which serves as a boundary line for a parcel of land. For example, a stream on the eastern edge of the property serves ...
Legal mechanism available for a person who is over his head financially and is unable to meet his financial obligations. ...
Proposing or presenting for acceptance a price for a property parcel. Evidence of willingness to enter into a sales agreement. The bid price in a real estate or security ...
Local governmental ordinance breaking down the country into districts that are restricted on how private property is to be constructed and used. It applies to the land and buildings. The ...
Formal statement by an auditor, after through examination and consideration, as to whether a real estate company's financial statements fairly present financial position and operating ...
Timeshare homes is the popular name given to the concept of fractional ownership in real estate, and, in fact, is a better term to explain its meaning.Why?Well, fractional ownership means ...
Heading of a document, such as a real estate report. ...
Have a question or comment?
We're here to help.