Freddie Mac CreditSmart Exam Complete Study Guide & Practice Questions (Latest )

Freddie Mac Credit Smart Exam Complete Study Guide &
Practice Questions (Latest 2026-2028)

Pass your housing counselor certification on the first attempt with this comprehensive
study guide for the Freddie Mac CreditSmart Exam. This high-yield resource breaks
down core financial literacy pillars, including credit asset management, debt-to-income
ratios, budgeting strategies, and the modern homebuying process. Eliminate testing
anxiety and master credit underwriting concepts using realistic practice scenarios
modeled directly after the official Freddie Mac training curriculum



The percentage of your gross monthly income that goes toward paying for your housing
expenses is called the "housing expense ratio" and is based on the total housing
payment, which includes: - CORRECT ANSWER Principal, interest, property
taxes, homeowner's insurance, mortgage insurance, homeowner's or condo association
fees

QUESTION :Lenders don't include your future housing payment in your debt-to-income
ratio, only all other outstanding debts. - CORRECT ANSWER False

QUESTION :The principal amount is the total amount borrowed. - CORRECT
ANSWER True

QUESTION :Do lenders use gross income or net profits when calculating mortgage
affordability for self-employed borrowers? - CORRECT ANSWER Net profits

QUESTION :An escrow account is a special account managed by the borrower that
holds funds for property taxes and property insurance payments. - CORRECT
ANSWER False

QUESTION :Having adequate cash reserves demonstrates to your lender that you
have responsibly managed your money and have savings and other assets to fall back
on in case of emergency. - CORRECT ANSWER True

QUESTION :Capital - or cash to close - refers to the funds you need to save in order to
cover the cost of down payment and closing costs. - CORRECT ANSWER True

QUESTION :Acceptable sources of capital include: - CORRECT ANSWER Funds
from a family member, funds from a down payment assistance program or funds from
your savings account

, QUESTION :Lenders consider investments to be (select all that apply): - CORRECT
ANSWER Lenders consider investments to be IRAs, bonds, CDs, stocks and 401(k)
plans.

QUESTION :To determine if you have adequate savings to obtain a mortgage and
sustain homeownership, lenders will average the last six months of your checking and
savings account balances. - CORRECT ANSWER False

QUESTION :Lenders consider four primary factors when determining whether to
approve a loan - the 4 C's of lending. What are they? - CORRECT ANSWER
Credit, Capacity, Capital and Collateral

QUESTION :Derogatory information on your credit report may include: collections,
judgements, bankruptcies and/or late payments. - CORRECT ANSWER True

QUESTION :Lenders generally don't have any guidelines or restrictions when it comes
to the home you want to purchase or its condition, provided you have good credit. -
CORRECT ANSWER False

QUESTION :The home inspection is ordered through the lender and determines the
market value of the home. - CORRECT ANSWER False

QUESTION :Manufactured homes are the same as mobile homes and don't need to
meet federal construction and safety standards. - CORRECT ANSWER False

QUESTION :If you make extra payments on your loan, that can help pay down the
principal faster and thus greatly reduce the interest due on the loan. - CORRECT
ANSWER True

QUESTION :Government insured loans, such as FHA loans, are the only low down
payment mortgages available to homebuyers. - CORRECT ANSWER False

QUESTION :A fixed-rate mortgage is a loan where the interest rate stays the same for
the life of the loan. - CORRECT ANSWER True

QUESTION :Which of the following loans are guaranteed by the federal government
(select all that apply): - CORRECT ANSWER VA, USDA, FHA

QUESTION :There may be special loan products and first-time homebuyer or
affordable homeownership programs available in your community and it's worth calling
your local lenders, credit unions and housing counseling agencies to find out about your
options. - CORRECT ANSWER True

, QUESTION :What percentage of the purchase price is required as a down payment for
conventional conforming loans to avoid paying private mortgage insurance? -
CORRECT ANSWER 20%

QUESTION :Private mortgage insurance protects the borrower if they can't make their
mortgage payment. - CORRECT ANSWER False

QUESTION :It's okay to borrow money from a family member for your down payment,
as long as you pay the family member back. - CORRECT ANSWER False

QUESTION :You will need to repay the seller any property or school taxes that they
have already paid on the property. - CORRECT ANSWER True

QUESTION :LTV stands for loan-to-value and indicates the amount of the loan you
owe as a percentage of the value of the property. - CORRECT ANSWER True

QUESTION :The Annual Percentage Rate (APR) is the same as the interest rate. -
CORRECT ANSWER False

QUESTION :The mortgage loan process occurs in the following order: - CORRECT
ANSWER Pre-qualification or pre-approval, loan application, loan processing, loan
underwriting, loan approval or denial.

QUESTION :Making pre-payments (also called principal-only payments) can help you
pay off your loan sooner and potentially save you thousands of dollars in interest
payments. - CORRECT ANSWER True

QUESTION :If a lender denies your loan, they're required by law to provide the
applicant with an explanation and share the credit score they used to make the lending
decision. - CORRECT ANSWER True

QUESTION :Select all that apply. If you can't qualify for a loan on your own, you may
have other options, including: - CORRECT ANSWER --Finding a co-signer.
--Getting gift funds from a family member.
--Speaking with a HUD-certified housing counselor to create an action plan for resolving
key financial issues.

QUESTION :You should never sign a loan document that has blank lines. -
CORRECT ANSWER True

QUESTION :What is negative amortization (select all that apply): - CORRECT
ANSWER --A predatory lending tactic that consumers should avoid.

, --A payment schedule where your monthly payment doesn't cover the entire interest
due, resulting in the interest being added to your principal, which causes your principal
balance to increase instead of decrease.

QUESTION :A pre-payment penalty makes it costlier to pay off your loan early and thus
should be avoided. - CORRECT ANSWER True

QUESTION :The seven protected classes under the Fair Housing Law are race, color,
national origin, religion, sex, family status and disability. - CORRECT ANSWER
True

QUESTION :It's easier not to have funds caught up in an escrow account. -
CORRECT ANSWER False.
(You may be required to have an escrow account to pay for large homeownership
expenses, namely taxes and insurance. If you're not required to have one, it's still a
good idea to ask your lender to establish an escrow account because if you don't pay
your taxes or insurance, you could lose your home to foreclosure.)

QUESTION :Real estate agents must take a test to become licensed in their state. -
CORRECT ANSWER True

QUESTION :Real estate agents can help with the following: - CORRECT ANSWER
All of the below: (Finding a home in your price range,
Putting in a purchase offer,
Negotiating the best price)

QUESTION :Real estate agents may represent the seller or buyer and are generally
paid a commission by the seller of the home when the sale closes. The buyer may pay
the real estate agent's commission if the agreements with the real estate broker and the
seller are structured accordingly. - CORRECT ANSWER True

QUESTION :The Multiple Listing Service (MLS) is an online tool that is publicly
available and widely used by homebuyers. - CORRECT ANSWER False

QUESTION :If a homebuyer works with a real estate agent who's friendly, willing to
show homes at convenient times and does a great job at marketing his or her service,
no further "homework" is needed by the homebuyer to find a good agent. - CORRECT
ANSWER False

QUESTION :The neighborhood you choose to live in is not as important as the home
you choose to purchase. - CORRECT ANSWER False

QUESTION :When you make a purchase offer, you should always offer less than the
asking price. - CORRECT ANSWER False