What financial statement shows a borrower's income, expenses, and overall financial status?

What financial statement shows a borrower's income, expenses, and overall financial status?

• A. Credit Report
• B. Balance Sheet
• C. Income Statement
• D. Asset Statement

Answer: (C)

The income statement is the financial document that effectively presents a borrower's income, expenses, and overall financial status. It highlights the borrower's revenue streams, such as salary and any other forms of income, and juxtaposes these with all related expenses, including fixed and variable costs. This statement provides a clear snapshot of the borrower's financial health over a specified period, typically a month or a year. By illustrating how much money comes in versus how much goes out, the income statement allows lenders to assess the borrower's financial viability and ability to manage debt. It gives vital insights into the borrower's cash flow, which is a critical factor in determining their eligibility for a mortgage loan. Thus, it serves as an essential tool for mortgage loan officers during the evaluation of a borrower's financial profile. Other documents like the credit report primarily focus on credit history and creditworthiness. The balance sheet provides a snapshot of assets and liabilities at a particular point in time but does not detail income and expenses over a period. An asset statement lists all assets but lacks the comprehensive financial activity found in an income statement. Therefore, the income statement stands out as the correct answer for illustrating a borrower's financial position.

The income statement is the financial document that effectively presents a borrower's income, expenses, and overall financial status. It highlights the borrower's revenue streams, such as salary and any other forms of income, and juxtaposes these with all related expenses, including fixed and variable costs. This statement provides a clear snapshot of the borrower's financial health over a specified period, typically a month or a year.

By illustrating how much money comes in versus how much goes out, the income statement allows lenders to assess the borrower's financial viability and ability to manage debt. It gives vital insights into the borrower's cash flow, which is a critical factor in determining their eligibility for a mortgage loan. Thus, it serves as an essential tool for mortgage loan officers during the evaluation of a borrower's financial profile.

Other documents like the credit report primarily focus on credit history and creditworthiness. The balance sheet provides a snapshot of assets and liabilities at a particular point in time but does not detail income and expenses over a period. An asset statement lists all assets but lacks the comprehensive financial activity found in an income statement. Therefore, the income statement stands out as the correct answer for illustrating a borrower's financial position.