Which of the following is considered one of the primary risk factors by Fannie Mae in assessing a loan application?

Fannie Mae considers the credit score as one of the primary risk factors in assessing a loan application because it serves as a significant indicator of a borrower's creditworthiness. A credit score represents the borrower's credit history, including their timeliness in making payments, the amount of debt they currently hold, and various financial behaviors. Lenders use credit scores to predict the likelihood that a borrower will default on a loan. A higher credit score suggests a reliable borrower who is more likely to repay the mortgage, while a lower score indicates greater risk. This assessment helps Fannie Mae make informed decisions regarding loan approvals and interest rates.

While debt-to-income ratio, employment history, and loan-to-value ratio are also important in the overall assessment of a borrower, the credit score is particularly influential in determining risk. The debt-to-income ratio evaluates the borrower's ability to manage monthly payments, employment history reflects job stability, and loan-to-value ratio assesses equity and risk relative to the home's value. However, the credit score stands out as a critical measure of how a borrower has previously managed credit, forming the basis for assessing future lending risk.