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HUD Practice Exam Questions with

Complete Solutions

Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? - ANS: List of Assets Retirement plan statement Pay stub X Current lease A client would like purchase a home within one year. The client is motivated to increase household income as a way to save for a down payment and qualify for a loan. Which is the best solution for the client to reach this goal? - ANS: A credit report may contain which information? - ANS: Income history Criminal record

of accounts in collection status

A history of payments on an elctric bill A credit report contains inaccurate information. Which action item should the counselor include in the Client Action Plan? - ANS: FIle a dispute with the appropaite credit reporting agency Six months ago a client left a job as a reporter to start a business in the retail industry. To prepare to buy a house, the client closed credit card accounts and has been using savings to pay down credit card debt and collections. The client has not been able to save much for a down payment with all the debt payments but knows about an affordable homeownership program that only requires a 1% down payment with an FHA loan. What might result from the client closing the credit card accounts? - ANS: Which action would a client take to improve a credit score? - ANS:

A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? - ANS: FCBA A client shopping for a mortgage loan presents a housing counselor with an offer from a local mortgage lender. The interest rate on the offer is 7.5% for a 30-year fixed rate mortgage with a 20% down payment required. The counselor reviews the client file and determines the client's credit score is 725 and the client's total debt-to-income ratio is 20%. The client asks the housing counselor if the offer is a case of illegal predatory lending. How should the housing counselor respond? - ANS: I am unable to determine whether the loan is predatory but i suggest you shop around with other ledning sources Which action should a counselor recommend a client take first after discovering identity theft? - ANS: File an identity theft report In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? - ANS: When weighing housing options A client works 40 hours a week making $15 an hour. What is the highest monthly mortgage the client can afford based on income if the client secures a conventional loan? - ANS: Front End Ratio Formula Conventional = <28% Which type of government insured loan was created for financing homes in rural areas? - ANS: USDA A client keeps having budget problems due to unexpected expenses. Which financial tool would best assist this client to prepare for unexpected expenses and avoid increasing credit usage? - ANS: Emergency Fund A client has a monthly household income of $2,300, monthly debt payments of $450, and an optimal monthly housing ratio of 32%. What is the client's optimal monthly housing payment? - ANS: Front End Ratio Formula

What is the back-end ratio for a client with a monthly housing expense of $1,250, a monthly total of $ in other consumer debt payments, and a gross household income of $4,460 per month (rounded to the nearest whole percent)? - ANS: Debt to income ratio or back end ratio A client earns a salary of $45,000 at a job held for three years. The client has credit card bills, student loans, and a car loan totaling $500 per month. The client has already saved $3,500 for a down payment and is using an FHA Energy Efficient Mortgage (EEM). If the client wants to make the minimum down payment for a home priced at $150,000, how much more does the client need to save? - ANS: FHA downpayment is at least 3.5% Under which condition would most down payment assistance programs approve a waiver of the homeownership education requirement? - ANS: Most will not waive the homeownership education requirement Which type of assistance administered by a public housing authority allows for location flexibility? - ANS: Project based vouchers 2.2- A client's payment history affects which factor of creditworthiness? - ANS: Character Which action may a lender take to determine a borrower's character? - ANS: Call an employer to verify employment A client is in the process of purchasing a home with a sales price of $162,000. The client has a net worth of $50,000, a credit score of 680, and a debt-to-income ratio of 36%. The home has appraised for $155,000. Which factor of creditworthiness will most likely be an obstacle to purchasing the home? - ANS: Capacity When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered? - ANS: Capital A first-time buyer wants a conventional loan but does not have the assets to qualify. This client may have to purchase with an FHA loan unless the client saves more money. Which of the Four C's of Credit does this involve? - ANS: Capital

Which describes a homebuyer who would be ineligible as a first-time homebuyer, as defined by most down payment assistance programs? - ANS: A client who lost a home to foreclosure two years ago Which step does a homebuyer complete in the process of purchasing a home? - ANS: Get a home inspection A counselor's understanding of the client's spending habits and use of credit are most important in which step of the homebuying process? - ANS: Determining if homeownership is right for the client Which charge cannot change from the Loan Estimate to the Closing Disclosure? - ANS: Fees paid to the lender Which is the minimum qualifying credit score for an FHA mortgage if the client made a 3.5% down payment? - ANS: 640 A client has saved money for a small down payment and closing costs to purchase a $100,000 home in the city. The client is deciding whether to begin the homebuying process now or continue saving for a larger down payment. Client Profile ► Credit Score - 700 ► Monthly income - $3, ► Savings - $15, Types of Loans - LTV (%) ► Traditional conventional loan - 80% ► Conventional/piggyback - 80%/10% ► Conventional loan - 90% ► FHA loan - 96.5%

Which loan type would provide the highest monthly payment, assuming interest rates and other factors are equal? - ANS: A client, who is the surviving spouse of a military servicemember, is interested in buying a home. The client now works at a local nonprofit agency, making $36,000 per year. The client has $4,000 in savings and a credit score of 624. If a client has just received a commitment from a lender to provide a loan for a fixed loan amount based on a review of the complete loan application package by an underwriter, in what stage of the lending process is the client? - ANS: What are key differences between PMI and MIP? - ANS: A client seeking to purchase is trying to decide between an FHA-insured mortgage and another mortgage insured by private mortgage insurance. Which is a distinguishing difference between these two types of mortgage insurance? - ANS: Which borrower information is contained in the Uniform Residential Loan Application (URLA)? - ANS: Assest information In order to comply with the Know Before You Owe rule, which disclosures were replaced with new versions that more clearly outline mortgage terms to borrowers? - ANS: Loan Esimate and CD Which government regulation prohibits a lender from discriminating against a borrower who uses public assistance to qualify for a mortgage loan? - ANS: Equal Credit Opportunity Act Which item would affect the cost of earthquake insurance? - ANS: Structural Material For a client whose most recent rental history is unfavorable, which initial strategy should a housing counselor recommend to increase a potential landlord's willingness to rent to the client? - ANS: Which entity would be most likely to issue a Housing Choice Voucher? - ANS: Local housing authority

What is the purpose of the Veterans Affairs Supportive Housing (VASH) program? - ANS: To end veteran homelessness A tenant's apartment building has been sold. The new owners have informed the tenant that the rent will immediately increase by $100 a month despite having four months left on the written lease. Which best describes the situation? - ANS: Which is a typical responsibility of a landlord? - ANS: Repairing a leak in the roof A client is currently renting month to month (tenancy at sufferance). What advice should a housing counselor recommend to better secure the housing? - ANS: Written leaase Which circumstance is generally covered by renter's insurance? - ANS: Which family is most likely to qualify for the Earned Income Tax Credit (EITC)? - ANS: UE single mom with 3 kids Delinquency on which type of payment can cause a lien to be placed on a client's property? - ANS: HOA dues Which is a possible outcome for member residents if a homeowners association (HOA) imposes a community assessment? - ANS: A homeowner has decided to remodel the basement over the next 12 months. The project should cost just under $24,000, and the hope is to borrow the money at a very low interest rate that can be paid off over a longer period of time. Which home financing option would work best? - ANS: HELOC A potential homebuyer with minimal savings for a down payment and a low credit score is most likely to qualify for which mortgage? - ANS: FHA Which is the most significant benefit of using a real estate agent? - ANS: Negotiating the sale

Which item is critical to consider when working with a client to prepare a household system maintenance plan? - ANS: Target replacement date Which strategy most effectively increases a home's energy efficiency? - ANS: increase attice insulation Which best describes the ENERGY STAR program? - ANS: Which action would most likely increase the energy efficiency of a home? - ANS: Which should a housing counselor recommend that a client include in a household maintenance plan? - ANS: Which item should be included in an emergency preparedness plan? - ANS: A client with limited financial resources wants to improve safety in the home to prepare for natural disasters. Which is the best resource for the client to use in researching this topic? - ANS: ready.come Which would be the best location to identify in a household emergency preparedness plan as a safe place to meet in the event of an evacuation? - ANS: What was the primary purpose of the Making Home Affordable program? - ANS: The terms Ability to Repay and Qualified Mortgage were defined in regulations implemented by the Consumer Finance Protection Bureau (CFPB) because of what industry wide problem? - ANS: Two homeowners are making adjustments to household spending. Their Client Action Plans outline several potential steps. Client 1 ► Work overtime ► Hold a yard sale

► Downgrade cable service ► Limit miscellaneous spending Client 2 ► Secure second job ► Sell assets (e.g., car, furniture) ► Suspend cable and home phone ► Eliminate miscellaneous spending Based on the action steps for each client, what might a housing counselor assume? - ANS: What should a counselor and tenant focus on when developing an emergency budget? - ANS: A client is delinquent on the mortgage and at risk of default. The client is considering signing the deed over to a real estate investor to avoid foreclosure. What should the housing counselor recommend? - ANS: Which option would be most likely to require that the mortgage is current for eligibility? - ANS: A family suffers a loss of income due to unemployment and is now facing a pending foreclosure. After reviewing the family's budget, the housing counselor learns that the family has a negative cash flow of almost $300. The housing counselor recommends adjusting expenses, which results in a positive cash flow of $400 per month. The family would like to pursue an FHA retention option. They are seven months behind on the mortgage and their debt-to-income ratio is 29%. Which option is best for this situation? - ANS: Which aspect of a loan may a client be able to modify when seeking a loan modification due to a financial hardship because of a divorce? - ANS: What information is needed to counsel every client through the loss mitigation process? - ANS: Profit and loss statement

Why is it important to include a 4506-T form when submitting a loss mitigation package - ANS: A client who is not behind on the mortgage was recently informed of a reduction of income for two months by the client's employer. The client has an FHA loan and would like to take action as soon as possible to avoid a mortgage delinquency. Which FHA Loss Mitigation option is likely best for this client?

• ANS: Fha Loan Mod What loss mitigation option may allow a borrower an FHA Partial Claim? - ANS: Which type of organization making an unsolicited offer to avoid foreclosure could indicate a scam? - ANS: How should a homeowner interpret a letter from a lawyer offering to stop foreclosure proceedings for an upfront fee? - ANS: Which option allows the borrower to avoid foreclosure by disposing of a property for an amount less than the outstanding mortgage balance? - ANS: Under what circumstance must a servicer refrain from beginning the foreclosure process? - ANS: Which does a servicer do in the non-judicial foreclosure process? - ANS: In which circumstance may a tenant terminate a lease without financial repercussions? - ANS: When a housing counselor is assisting a low-income client in danger of eviction, which referral would be most appropriate? - ANS: 8 Which strategy used by an unemployed client will most likely result in the client moving out of a shelter into permanent affordable housing? - ANS:

A client recently experienced an unexpected car expense, which resulted in the client using half the rent to pay for the expense. The client, who still has a full-time job, would like to avoid making a late payment. Which resource should a housing counselor recommend first? - ANS: A counselor is working with a client who has recently been evicted. What would be the most appropriate housing referral? - ANS: A tenant has a Housing Choice Voucher for a two-bedroom apartment, but lives in a three-bedroom apartment and pays the difference in rent. Due to a recent job change, the tenant is behind on rent but wishes to keep the voucher. What should the counselor encourage the client to do? - ANS: Which practice is a legal exception to the Fair Housing Act? - ANS: Which practice remained legal after the passage of the Civil Rights Act of 1964? - ANS: Which are protected characteristics under the federal Fair Housing Act? - ANS: Which is a potential violation of the Fair Housing Act? - ANS: A single, gay, African-American parent with four kids is turned away from a property because the landlord does not want the kids to destroy the property. Which protected characteristic of discrimination most likely fits this case? - ANS: Which HUD program provides funding to nonprofits that assist people who may have been victims of housing discrimination? - ANS: FHIP When filing a fair housing complaint, why is it important to provide the date of the alleged violation? - ANS: Because complaints are only valid if filed within one year of the alleged violation While meeting with a housing counselor, a client describes a possible housing discrimination situation. Which is the best way to handle the violation? - ANS:

While meeting with a housing counselor, a client describes a possible housing discrimination situation. Which is the best way to handle the violation? - ANS: