HUD Certification Exam 2023 Questions and Answers

Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? Pay stub Retirement plan statement List of assets Current lease - Answer- Pay stub 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? Find a second job Borrow from retirement fund Sell major assets Find a temporary job through a staffing service - Answer- Find a second job A credit report may contain which information? The number of accounts in collection status A history of payments on an electric bill Income history Criminal record - Answer- The number of accounts in collection status A credit report contains inaccurate information. Which action item should the counselor include in the Client Action Plan? -Attach a letter to mortgage applications explaining the inaccuracies. -Investigate the reasons why the inaccuracies occurred to determine the responsible party. -Include a personal consumer statement on the credit report. -File a dispute with the appropriate credit reporting agency. - Answer- File a dispute with the appropriate 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 home-ownership program that only requires a 1% down payment with an FHA loan. What might result from the client closing the credit card accounts? -It decreases credit utilization, causing a negative impact on the credit score. -It increases credit utilization, causing a negative impact on the credit score. -It increases credit utilization, causing a positive impact on the credit score. -It decreases credit utilization, causing a positive impact on the credit score. - Answer- It decreases credit utilization, causing a positive impact on the credit score. Which action would a client take to improve a credit score? -Request to expunge public records -Apply for new credit cards to increase credit -Cancel all credit cards -Pay delinquent accounts - Answer- Pay delinquent accounts A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? -Fair Credit Billing Act -Fair Credit Reporting Act -Fair Housing Act -Fair and Accurate Credit Transactions Act - Answer- 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%. The client asks the housing counselor if the offer is a case of illegal predatory lending. How should the housing counselor respond? -"You have been a victim of predatory lending and should file a report with the Consumer Finance Protection Bureau (CFPB)." -"The loan seems reasonable. You might do better, but I cannot steer you to any particular loan originator." -"I am unable to determine whether the loan is predatory, but I suggest you shop around with other lending sources." -"I cannot offer legal advice, but I would not proceed with the loan." - Answer- "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? -File for a name change. -Apply for a new Social Security number. -File an identity theft report. -Purchase identity theft protection. - Answer- File an identity theft report. In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? -When considering closing costs -When choosing a loan officer -When weighing housing options -When applying for a loan modification - 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? -$728 -$806 -$936 -$1,118 - Answer- $728 Which type of government insured loan was created for financing homes in rural areas? -VA -Fannie Mae -FHA -USDA - Answer- USDA Which type of assistance administered by a public housing authority allows for location flexibility. 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? -Emergency fund -Line of credit -Payday loan -Retirement savings account - 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? -$592 -$736 -$880 -$1,186 - Answer- $736 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)? -29% -30% -31% -32% - Answer- 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? -$1,750 -$2,250 -$4,500 -$5,250 - Answer- $1,750 Under which condition would most down payment assistance programs approve a waiver of the home-ownership education requirement? -Most will not waive the home-ownership education requirement -When the home-buyer has successfully passed a home-ownership exam -When the home-buyer has a verifiable disability or handicap -When the home-buyer has completed four years of college - Answer- Most will not waive the home-ownership education requirement Which type of assistance administered by a public housing authority allows for location flexibility? -USDA -FHA -Project-based vouchers -Tenant-based vouchers - Answer- Tenant-based vouchers A client's payment history affects which factor of creditworthiness? -Collateral -Capacity -Character -Capital - Answer- Character Which action may a lender take to determine a borrower's character? -Calculate housing ratios to see debt obligations. -Examine pay stubs to determine amount of income. -Review the appraisal. -Call an employer to verify employment. - Answer- 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? -Character -Capital -Collateral -Capacity - Answer- Collateral When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered? -Character -Collateral -Capital -Capacity - Answer- Capital A first-time buyer wants a conventional loan but does not have the assets to qualify. This client may have to purchase with an FHA loan unless the client saves more money. Which of the Four C's of Credit does this involve? -Capacity -Character -Capital -Collateral - Answer- Capital Which describes a home-buyer who would be ineligible as a first-time home-buyer, as defined by most down payment assistance programs? A client who sold a home five years ago for a net profit. A client who lost a home to foreclosure two years ago. A client who leases out units in a cousin's rental property. A client who lives in a home owned by the client's parents. - Answer- Which step does a home-buyer complete in the process of purchasing a home? Get a home assessment Get a home inspection Select the appraiser Purchase life insurance - Answer- Get a home inspection A counselor's understanding of the client's spending habits and use of credit are most important in which step of the home-buying process? Evaluating housing affordability for the client Obtaining financing Making an offer on a home Determining if home-ownership is right for the client - Answer- Evaluating housing affordability for the client Which charge cannot change from the Loan Estimate to the Closing Disclosure? Initial deposit for the escrow amount Fees paid to lender Daily interest charge Government recording charge - Answer- Which is the minimum qualifying credit score for an FHA mortgage if the client made a 3.5% down payment? 540 580 600 640 - Answer- 580 A client has saved money for a small down payment and closing costs to purchase a $100,000 home in the city. The client is deciding whether to begin the home-buying process now or continue saving for a larger down payment. Client Profile ► Credit Score - 700 ► Monthly income - $3,000 ► Savings - $15,000 Types of Loans - LTV (%) ► Traditional conventional loan - 80% ► Conventional/piggyback - 80%/10% ► Conventional loan - 90% ► FHA loan - 96.5% Which loan type would provide the highest monthly payment, assuming interest rates and other factors are equal? Conventional/piggyback FHA loan Conventional loan Traditional conventional loan - Answer- A client, who is the surviving spouse of a military service member, is interested in buying a home. The client now works at a local nonprofit agency, making $36,000 per year. The client has $4,000 in savings and a credit score of 624. If a client has just received a commitment from a lender to provide a loan for a fixed loan amount based on a review of the complete loan application package by an underwriter, in what stage of the lending proces