FREDDIE MAC CREDITSMART EXAM
300 QUESTIONS & ANSWERS — COMPLETE CREDITSMART
HOMEBUYER STUDY GUIDE
1. The percentage of your gross monthly income that goes toward
housing expenses is called the:
A) Credit utilization ratio
B) Housing expense ratio
C) Debt settlement ratio
D) Savings ratio
Correct Answer: B
Explanation: The housing expense ratio measures the portion of gross
monthly income used for housing expenses.
2. Which of the following is generally considered an important first step
before purchasing a home?
A) Choose furniture
B) Determine your financial readiness
C) Apply for several credit cards
D) Skip budgeting
Correct Answer: B
Explanation: Understanding income, expenses, savings, credit, and
affordability helps determine whether homeownership is financially
appropriate.
,3. Which type of income is received before taxes and other deductions
are removed?
A) Net income
B) Disposable income
C) Gross income
D) Residual income
Correct Answer: C
Explanation: Gross income is income before deductions such as taxes
and retirement contributions.
4. What is the primary purpose of a budget?
A) Eliminate all spending
B) Track and plan how money is earned and used
C) Increase credit limits automatically
D) Guarantee mortgage approval
Correct Answer: B
Explanation: A budget helps organize income and expenses and
supports financial decision-making.
5. Which item is typically considered a fixed expense?
A) Monthly mortgage payment
B) Restaurant spending
C) Entertainment
D) Clothing purchases
,Correct Answer: A
Explanation: Fixed expenses generally remain relatively consistent from
month to month.
6. What does a credit score primarily attempt to predict?
A) Future home value
B) Likelihood of repaying borrowed money as agreed
C) Amount of property taxes
D) Future salary
Correct Answer: B
Explanation: Credit scoring models evaluate credit behavior to help
predict credit risk.
7. Which action can help establish positive credit history?
A) Consistently making payments on time
B) Ignoring account statements
C) Applying for many accounts simultaneously
D) Maxing out credit cards
Correct Answer: A
Explanation: Timely payments are an important part of responsible
credit management.
8. What does a credit report contain?
, A) Only your current salary
B) Information about your credit accounts and payment history
C) Your complete tax return
D) Your homeowner's insurance policy
Correct Answer: B
Explanation: Credit reports contain information about credit accounts,
balances, payment history, inquiries, and other credit-related
information.
9. Which action is generally most helpful when preparing to buy a
home?
A) Create an emergency savings fund
B) Increase unnecessary debt
C) Stop reviewing your credit
D) Spend all available savings
Correct Answer: A
Explanation: Emergency savings can help cover unexpected expenses
without relying heavily on new debt.
10. What is a down payment?
A) A fee paid to a real estate agent only
B) The portion of the purchase price paid upfront by the buyer
C) A monthly utility bill
D) A credit card deposit
300 QUESTIONS & ANSWERS — COMPLETE CREDITSMART
HOMEBUYER STUDY GUIDE
1. The percentage of your gross monthly income that goes toward
housing expenses is called the:
A) Credit utilization ratio
B) Housing expense ratio
C) Debt settlement ratio
D) Savings ratio
Correct Answer: B
Explanation: The housing expense ratio measures the portion of gross
monthly income used for housing expenses.
2. Which of the following is generally considered an important first step
before purchasing a home?
A) Choose furniture
B) Determine your financial readiness
C) Apply for several credit cards
D) Skip budgeting
Correct Answer: B
Explanation: Understanding income, expenses, savings, credit, and
affordability helps determine whether homeownership is financially
appropriate.
,3. Which type of income is received before taxes and other deductions
are removed?
A) Net income
B) Disposable income
C) Gross income
D) Residual income
Correct Answer: C
Explanation: Gross income is income before deductions such as taxes
and retirement contributions.
4. What is the primary purpose of a budget?
A) Eliminate all spending
B) Track and plan how money is earned and used
C) Increase credit limits automatically
D) Guarantee mortgage approval
Correct Answer: B
Explanation: A budget helps organize income and expenses and
supports financial decision-making.
5. Which item is typically considered a fixed expense?
A) Monthly mortgage payment
B) Restaurant spending
C) Entertainment
D) Clothing purchases
,Correct Answer: A
Explanation: Fixed expenses generally remain relatively consistent from
month to month.
6. What does a credit score primarily attempt to predict?
A) Future home value
B) Likelihood of repaying borrowed money as agreed
C) Amount of property taxes
D) Future salary
Correct Answer: B
Explanation: Credit scoring models evaluate credit behavior to help
predict credit risk.
7. Which action can help establish positive credit history?
A) Consistently making payments on time
B) Ignoring account statements
C) Applying for many accounts simultaneously
D) Maxing out credit cards
Correct Answer: A
Explanation: Timely payments are an important part of responsible
credit management.
8. What does a credit report contain?
, A) Only your current salary
B) Information about your credit accounts and payment history
C) Your complete tax return
D) Your homeowner's insurance policy
Correct Answer: B
Explanation: Credit reports contain information about credit accounts,
balances, payment history, inquiries, and other credit-related
information.
9. Which action is generally most helpful when preparing to buy a
home?
A) Create an emergency savings fund
B) Increase unnecessary debt
C) Stop reviewing your credit
D) Spend all available savings
Correct Answer: A
Explanation: Emergency savings can help cover unexpected expenses
without relying heavily on new debt.
10. What is a down payment?
A) A fee paid to a real estate agent only
B) The portion of the purchase price paid upfront by the buyer
C) A monthly utility bill
D) A credit card deposit
