What two questions must a lender answer when evaluating the security of a borrower?

In evaluating the security of a borrower, it is crucial for a lender to assess how strong the security being offered by the property is. This refers to the value and condition of the property that serves as collateral for the loan. An understanding of the property’s worth helps the lender determine the loan-to-value ratio, which is essential to mitigating risk. If the value of the property is high and is expected to maintain or appreciate, the lender can feel more secure about lending the money, knowing there is an asset that can be seized if the borrower defaults. The condition, location, and potential future market trends associated with the property further inform the assessment of security.

While other factors such as the borrower's personal assets, income level, and reliability to repay do contribute to the overall lending decision, they do not specifically pertain to the immediate evaluation of the security aspect of the loan. The property's inherent strength as collateral is a primary focus in securing the loan, which is why understanding its value is of utmost importance for the lender.