HUD Housing Counselor Certification Practice Exam Questions and Answers

What is the maximum percent of area median income allowable for a household to qualify for a Housing Choice Voucher? - Answer- 50% Which is the maximum recommended housing ratio for renting an apartment? - Answer- 30% Eligibility requirements for down-payment assistance programs include which factors? - Answer- Income, home-buyer education, purchase price The client is considering an FHA mortgage. What is the upfront mortgage insurance premium (UFMIP) for an FHA mortgage? - Answer- 1.75% If the client was denied a mortgage loan and the lender told him to come back after his divorce had been final for three years, what is the best advice for the housing counselor to provide to the client to report a violation to ECOA? - Answer- Contact the Federal Trade Commission as the lender's action might violate the Equal Credit Opportunity Act A question from a lender on the client's Medical History would be inappropriate or appropriate? - Answer- Inappropriate Who is responsible for educating home-buyers about their rights? - Answer- Housing Counselor In order to minimize the impact on the client's credit score, what is the maximum time frame within which the client should apply for pre-approval from multiple lenders? - Answer- A 30-day period What are the responsibilities of a home inspector? - Answer- Examine mechanical systems, Evaluate the condition of a home, Identify items to be repaired or replaced Which is the best reason that a housing counselor would suggest that a client speak to three to five different lenders? - Answer- To compare loan estimates Which is the best advice that a housing counselor can give the client to protect against identity theft? - Answer- Review credit report at least once per year The client tells the lender that he is expecting a raise soon. Should the Lender provide a Loan Estimate (LE) with, or without factoring the raise? - Answer- Provide a loan estimate without factoring in the raise If this client obtains a mortgage of $100,000, typically, how much should he expect to pay for closing costs? - Answer- $3000 to $4000 Is Application Fee an upfront cost of clients who are considering renting or buying a property? - Answer- Renting A client wants to customize his home with do-it-yourself projects, this is an indication the client is best aligned with which housing option; Home-ownership or Renting? - Answer- Home-ownership The client's gross monthly income is $4167 and the monthly debts are $435. What is the maximum mortgage payment (rounded to the nearest dollar) for which this client would qualify using a standard conventional loan? - Answer- $1,065 NOTE: The maximum front-end ratio for a standard conventional loan is 28%, and the back-end ratio is 36%. The front-end ratio is calculated as 28% of the client's monthly income of $4,167, which is $1,167. The back-end ratio is calculated as 36% of the client's monthly income of $4,167 minus the client's monthly debt of $435, which equals $1,065. Therefore, the maximum loan payment that the client qualifies for is the lower of the two numbers, which is $1,065. Which is the maximum debt-to-income ratio allowable for an FHA loan? - Answer- 43% Which is the maximum debt-to-income ratio allowable for an FHA Energy Efficiency Mortgage loan? - Answer- 45% The client's gross monthly income is $4167 and the monthly debts are $435. With a monthly mortgage payment of $950, which is the client's debt-to-income ratio (round to the nearest whole percent)? - Answer- 33% The client's gross monthly income is $4167 and the monthly debts are $435. If the client seeks an FHA Energy Efficient Mortgage (EEM) loan, what is the maximum housing payment for which he can qualify (rounded to the nearest dollar)? - Answer- $1,292 On which factor is a borrower's annual mortgage insurance premium (MIP) based? - Answer- Current principal balance NOTE: The annual mortgage insurance premium (MIP) is based on the unpaid principal balance of the loan. The loan-to-value ratio is used to determine when private mortgage insurance (PMI) can be dropped from the loan. Credit scores do not affect MIP but might affect PMI. Which is the upfront mortgage insurance premium (UFMIP) if the client purchases a home with an FHA loan amount of $116,000? - Answer- $2,030 The client only tracks bill payments. Which should the housing counselor recommend to help the client begin planning for a home purchase? A- Continue to track bill payments only B- Track income only C- Track all income and expenses D- Track savings deposits and expenses - Answer- C- Track all income and expenses How should a client apply for the Housing Choice Voucher Program? - Answer- Contact the local Public Housing Authority Which website provides information on programs to assist home-buyers with down payment assistance? - Answer- HUD.gov Based on the client's income of $56,400 per year of, savings of 12,000 toward a down payment, and credit score of 700, which mortgage option is likely best for her; Conventional loan, FHA loan, USDA Rural Development loan, or Subprime loan? - Answer- Conventional loan This client is denied a loan to purchase a home because she has not lived in the country for at least ten years. Which Act is this adverse action violating, and where should the client report this action to? - Answer- Report the action to the Federal Trade Commission, it is a violation of the Equal Credit Opportunity Act If the client submits a loan application, which document should she receive within three business days? - Answer- Loan Estimate What is a pre-approval from a lender? - Answer- When the lender commits to lend a fixed amount based on a review of the client's application. A client has been a paralegal for five years and earns $56,400 per year. She has been working part-time at an ice cream parlor for the past few summers to save for her first home. Now that she has saved $12,000 toward a down payment, she no longer needs to work a second job. In the next three months, the client would like to buy a single-family home near a good school for less than $150,000. Does this client meet a lender's expectation for continued employment? - Answer- Yes, because the client has been at her job over two years In reviewing a loan estimate, the housing counselor finds fees for services that seem unnecessary. What is the most likely explanation for these fees? Choose one: A- Predatory lending practices B- Subprime mortgage terms C- Regional lending considerations D- Variation in lending practices - Answer- A- Predatory lending practices The client thinks her cost of living is going to be the same because her mortgage payment and her rental payment are comparable. What are three recurring costs associated with home-ownership that are not part of home rental? A- Homeowners insurance, property taxes, home repairs B- Property taxes, renters insurance, utility bill C- Utility bill, car insurance, renters insurance D- Car insurance, property taxes, cable bill - Answer- Homeowners insurance, property taxes, home repairs Which additional information should the housing counselor request from the client to determine her readiness to purchase a home? Choose One: A- Planned family size B- Current lease C- Pre-qualification letter D- Expenses - Answer- D- Expenses A client has been a paralegal for five years and earns $56,400 per year. She has been working part-time at an ice cream parlor for the past few summers to save for her first home. Now that she has saved $12,000 toward a down payment, she no longer needs to work a second job. In the next three months, the client would like to buy a single-family home near a good school for less than $150,000. What is this client's maximum mortgage payment if the lender's housing ratio is 28 percent (round to the nearest dollar)? - Answer- $1,316 Which is the minimum percentage of the purchase price that the client needs to make as a down payment to avoid having to pay mortgage insurance with a conventional mortgage? - Answer- 20% Which factor determines whether the client will have to pay private mortgage insurance versus mortgage insurance premium? A- Size of loan B- Credit score C- Type of loan D- Loan-to-value ratio - Answer- C- Type of loan The client would like to purchase a single-family home. Prices in the area where she would like to live are around $450,000. She has $45,000 left from the life insurance settlement and she has saved an additional $5,000. She typically saves $500 per month, but when she has unexpected ex