HUD PRACTICE TEST AND CORRECT
ANSWERS
Which\document\is\most\important\when\working\with\a\client\to\develop\an\initial\budget\
as\part\of\a\Client\Action\Plan?\-\ans✔Pay\Stub
A\client\would\like\to\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✔Find\a\second\job
A\credit\report\may\contain\which\information?\-\ans✔The\number\of\accounts\in\
collection\status
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✔It\increases\credit\utilization,\causing\a\negative\impact\on\the\credit
score.
Which\action\would\a\client\take\to\improve\a\credit\score?\-\ans✔Pay\delinquent\accounts
A\client\does\not\receive\a\written\monthly\statement\from\the\credit\card\company.\Which\
credit\law\could\this\omission\violate?\-\ans✔Fair\Credit\Billing\Act
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%.\-\ans✔"I\am\unable\to\determine\whether\the\loan\is\predatory,\but\I\suggest\you\
shop\around\with\other\lending\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✔$728
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\Funds
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✔$736
Use\Front-End\Ratio
What\is\the\back-end\ratio\for\a\client\with\a\monthly\housing\expense\of\$1,250,\a\
monthly\total\of\$88\in\other\consumer\debt\payments,\and\a\gross\household\income\of\
$4,460\per\month\(rounded\to\the\nearest\whole\percent)?\-\ans✔30%
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✔$1,750
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✔Tenant-based\vouchers
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✔Collateral
ANSWERS
Which\document\is\most\important\when\working\with\a\client\to\develop\an\initial\budget\
as\part\of\a\Client\Action\Plan?\-\ans✔Pay\Stub
A\client\would\like\to\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✔Find\a\second\job
A\credit\report\may\contain\which\information?\-\ans✔The\number\of\accounts\in\
collection\status
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✔It\increases\credit\utilization,\causing\a\negative\impact\on\the\credit
score.
Which\action\would\a\client\take\to\improve\a\credit\score?\-\ans✔Pay\delinquent\accounts
A\client\does\not\receive\a\written\monthly\statement\from\the\credit\card\company.\Which\
credit\law\could\this\omission\violate?\-\ans✔Fair\Credit\Billing\Act
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%.\-\ans✔"I\am\unable\to\determine\whether\the\loan\is\predatory,\but\I\suggest\you\
shop\around\with\other\lending\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✔$728
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\Funds
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✔$736
Use\Front-End\Ratio
What\is\the\back-end\ratio\for\a\client\with\a\monthly\housing\expense\of\$1,250,\a\
monthly\total\of\$88\in\other\consumer\debt\payments,\and\a\gross\household\income\of\
$4,460\per\month\(rounded\to\the\nearest\whole\percent)?\-\ans✔30%
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✔$1,750
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✔Tenant-based\vouchers
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✔Collateral
