HUD Practice Exam 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? - ANSWER-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? - ANSWER- A credit report may contain which information? - ANSWER-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? - ANSWER-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? - ANSWER- Which action would a client take to improve a credit score? - ANSWER- A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? - ANSWER-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? - ANSWER-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? - ANSWER-File an identity theft report In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? - ANSWER-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? - ANSWER-Front End Ratio Formula Conventional = 28% Which type of government insured loan was created for financing homes in rural areas? - ANSWER-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? - ANSWER-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? - ANSWER-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 $88 in other consumer debt payments, and a gross household income of $4,460 per month (rounded to the nearest whole percent)? - ANSWER-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? - ANSWER-FHA downpayment is at least 3.5% Under which condition would most down payment assistance programs approve a waiver of the homeownership education requirement? - ANSWER-Most will not waive the homeownership education requirement Which type of assistance administered by a public housing authority allows for location flexibility? - ANSWER-Project based vouchers 2.2-23