HUD CERTIFICATION EXAMINATION STUDY GUIDE 2026
COMPLETE PRACTICE TEST WITH VERIFIED ANSWERS &
RATIONALES
EXAM OVERVIEW
The HUD Housing Counselor Certification Exam is a national test required for individuals to
become HUD-certified housing counselors. The examination covers six major topic areas:
1. Financial Management
2. Property Maintenance
3. Responsibilities of Homeownership and Tenancy
4. Fair Housing Laws and Requirements
5. Housing Affordability
6. Avoidance of, and Response to, Rental or Mortgage Delinquency and Avoidance of Eviction
or Mortgage Default
Exam Format & Requirements
| Component | Details |
|--||
| Number of Questions | 90 questions |
| Time Limit | 2 hours |
| Passing Score | Not publicly disclosed |
| Retake Policy | No limit on retakes; each retake must be purchased at the stated exam fee |
| Certification Requirement | Must pass the exam AND work for a HUD-approved agency |
HOW TO USE THIS STUDY GUIDE
For each question:
1. Cover the answer and try to recall from memory
2. Reveal the answer and check your response
3. Read the detailed rationale to understand why the answer is correct
4. Note the Key Topic reference to identify your strengths and weaknesses
,PRACTICE EXAMINATION
SECTION 1: FINANCIAL MANAGEMENT (Questions 1–15)
Question 1
An Adjustable Rate Mortgage (ARM) has an initial rate that applies for a defined period of time.
What happens to the interest rate after this initial period?
A) The rate stays the same for the life of the loan
B) The rate adjusts at pre-determined intervals and can increase or decrease
C) The rate is recalculated only once at the halfway point of the loan
D) The rate becomes fixed after the initial period ends
Answer: B) The rate adjusts at pre-determined intervals and can increase or decrease
Rationale: Adjustable Rate Mortgages (ARMs) have an initial rate that applies for a defined
period (typically one month to 10 years), then adjusts at pre-determined intervals for the life of
the loan. Interest rates can increase or decrease when adjusted.
Key Topic: Financial Management – Mortgage Types
Question 2
What is the definition of "Adjusted Gross Income" for housing counseling purposes?
A) Total income before any deductions
B) Gross income minus adjustments such as unreimbursed business expenses and retirement
contributions
C) Net income after all taxes are paid
D) The average of the last three years' income
Answer: B) Gross income minus adjustments such as unreimbursed business expenses and
retirement contributions
Rationale: Adjusted Gross Income is gross income minus adjustments (reductions) that one is
eligible for, such as deductions for unreimbursed business expenses, tuition and fees, and
contributions to certain retirement accounts.
, Key Topic: Financial Management – Income Calculation
Question 3
A borrower pays less than 20% for a down payment on a conventional loan. What will the lender
likely require?
A) Private Mortgage Insurance (PMI)
B) An FHA loan conversion
C) A co-signer
D) A larger escrow account
Answer: A) Private Mortgage Insurance (PMI)
Rationale: Private Mortgage Insurance (PMI) is an insurance policy that protects a lender from
potential risks when a homebuyer pays less than 20% for a down payment on a conventional
loan.
Key Topic: Financial Management – Mortgage Insurance
Question 4
Which mortgage type may be a good fit for borrowers with blemished or limited credit histories?
A) Conventional loan
B) VA loan
C) Subprime mortgage
D) FHA loan
Answer: C) Subprime mortgage
Rationale: Subprime mortgage loans have less stringent lending and underwriting terms and
conditions, and are usually offered to borrowers with blemished or limited credit histories. They
may also be a good fit for those ineligible for other loans.
Key Topic: Financial Management – Mortgage Types
Question 5
COMPLETE PRACTICE TEST WITH VERIFIED ANSWERS &
RATIONALES
EXAM OVERVIEW
The HUD Housing Counselor Certification Exam is a national test required for individuals to
become HUD-certified housing counselors. The examination covers six major topic areas:
1. Financial Management
2. Property Maintenance
3. Responsibilities of Homeownership and Tenancy
4. Fair Housing Laws and Requirements
5. Housing Affordability
6. Avoidance of, and Response to, Rental or Mortgage Delinquency and Avoidance of Eviction
or Mortgage Default
Exam Format & Requirements
| Component | Details |
|--||
| Number of Questions | 90 questions |
| Time Limit | 2 hours |
| Passing Score | Not publicly disclosed |
| Retake Policy | No limit on retakes; each retake must be purchased at the stated exam fee |
| Certification Requirement | Must pass the exam AND work for a HUD-approved agency |
HOW TO USE THIS STUDY GUIDE
For each question:
1. Cover the answer and try to recall from memory
2. Reveal the answer and check your response
3. Read the detailed rationale to understand why the answer is correct
4. Note the Key Topic reference to identify your strengths and weaknesses
,PRACTICE EXAMINATION
SECTION 1: FINANCIAL MANAGEMENT (Questions 1–15)
Question 1
An Adjustable Rate Mortgage (ARM) has an initial rate that applies for a defined period of time.
What happens to the interest rate after this initial period?
A) The rate stays the same for the life of the loan
B) The rate adjusts at pre-determined intervals and can increase or decrease
C) The rate is recalculated only once at the halfway point of the loan
D) The rate becomes fixed after the initial period ends
Answer: B) The rate adjusts at pre-determined intervals and can increase or decrease
Rationale: Adjustable Rate Mortgages (ARMs) have an initial rate that applies for a defined
period (typically one month to 10 years), then adjusts at pre-determined intervals for the life of
the loan. Interest rates can increase or decrease when adjusted.
Key Topic: Financial Management – Mortgage Types
Question 2
What is the definition of "Adjusted Gross Income" for housing counseling purposes?
A) Total income before any deductions
B) Gross income minus adjustments such as unreimbursed business expenses and retirement
contributions
C) Net income after all taxes are paid
D) The average of the last three years' income
Answer: B) Gross income minus adjustments such as unreimbursed business expenses and
retirement contributions
Rationale: Adjusted Gross Income is gross income minus adjustments (reductions) that one is
eligible for, such as deductions for unreimbursed business expenses, tuition and fees, and
contributions to certain retirement accounts.
, Key Topic: Financial Management – Income Calculation
Question 3
A borrower pays less than 20% for a down payment on a conventional loan. What will the lender
likely require?
A) Private Mortgage Insurance (PMI)
B) An FHA loan conversion
C) A co-signer
D) A larger escrow account
Answer: A) Private Mortgage Insurance (PMI)
Rationale: Private Mortgage Insurance (PMI) is an insurance policy that protects a lender from
potential risks when a homebuyer pays less than 20% for a down payment on a conventional
loan.
Key Topic: Financial Management – Mortgage Insurance
Question 4
Which mortgage type may be a good fit for borrowers with blemished or limited credit histories?
A) Conventional loan
B) VA loan
C) Subprime mortgage
D) FHA loan
Answer: C) Subprime mortgage
Rationale: Subprime mortgage loans have less stringent lending and underwriting terms and
conditions, and are usually offered to borrowers with blemished or limited credit histories. They
may also be a good fit for those ineligible for other loans.
Key Topic: Financial Management – Mortgage Types
Question 5
