HUD Exam- Homeownership Questions and Answers

Which factor is best for housing counselors to use when determining how much a client can afford to spend on purchasing a home? A. Debt to-income ratios B. Annual gross income C. Savings D. Options A, B, C E. None of the above - Answer- D. Options A, B, and C A person or company that makes loans for real estate purchases. "Loan officer" is a related term that refers to a representative of a lending or mortgage company who is responsible for soliciting homebuyers and for qualifying and processing loans. - Answer- Lender A government official responsible for determining the value of a property for taxation purpose. - Answer- Assessor A professional who conducts an inspection of the home's structure and mechanical systems to determine quality, soundness, and safety. S/he makes the potential homebuyer aware of any repairs that may be necessary. - Answer- Home Inspector A lender's representative who analyzes a loan application, the potential borrower's credit history, and a judgement of the property value to determine the amount of risk involved in making the loan. - Answer- Underwriter A professional who gives an estimate of a property's fair market value based on the sales of comparable homes in the area and on the property's features. This estimate is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. - Answer- Appraiser Which statement most accurately describes a member of the homebuying team? A. a real estate agent or broker is typically an attorney or works for an escrow company. S/he oversees the final transaction in property purchase, at which time the title is transferred from the seller to the buyer. B. The lender requires an assessment of the home by a home inspector before loan approval C. An insurance agent is also know as a settlement agent. D. a home inspector is generally paid by the buyer. - Answer- D. A home inspector is generally paid by the buyer Which piece of advice would you give to clients as they begin the process of obtaining financing? A. Never speak with lenders before settling on a home. B. Have all potential lenders pull credit within a 30-day window. C. Mortgages with adjustable rates are always best. D. Choose whichever lender is most prompt in returning your phone calls. - Answer- B. Have all potential lenders pull credit within a 30-day window. All of the following is information necessary for your client to gather in preparation for filling out the URLA, except: A. Figures related to income from child support. B. Figures related to student loans C. Year home was built D. Referrals of past landlords - Answer- D. Referrals of past lenders All of the following statements describe working with an appraiser during the "obtaining financing" step of purchasing a home, except: A. it is improper for an appraiser to consider racial or religious background of a neighborhood's residents to determine the value of a home. B. Lenders hire appraisers C. Homebuyers can cancel the offer contract if the contract includes a contingency clause. D. Homebuyers rarely are allowed to see the appraisal information and for that reason are encouraged to get a home inspection. - Answer- D. Homebuyers rarely are allowed to see the appraisal information and for that reason are encouraged to get a home inspection. -In some cases, the lender is required to share the appraisal information with clients. It is helpful for clients to review the appraisal report with you in order to identify any improper factors used to determine the home's value. Whether or not clients view the appraisal, they should have a home inspection done, especially since the two processes are different from one another. A client is shopping for a loan and submits a loan application to a lender. The client asks for information about possible settlement costs, but the lender says that he needs to see the purchase contract in order to move forward with the process. The lender should have provided which item? A. URLA B. ATR/QM C. Loan Estimate D. Closing Disclosure - Answer- C. Loan Estimate A client spoke with five lenders. Four of the five lenders quoted interest rates between 4.1% and 4.6%. One lender mentioned a 3.1% interest rate if she signed for it within the next 36 hours. She was very interested in this loan, so she asked for more information (e.g., conditions and fees). The lender provided some information about the loan, but nothing included the APR. Which regulation deems this practice unlawful? A. ECOA B. RESPA C. TILA D. HOEPA - Answer- C. TILA A certain mortgage company encourages all its clients to use a specific appraiser. The appraisers give the mortgage company $100 for every one of its clients who comes to them. If the mortgage company does not tell clients about the payment it receives for referrals, this is a breach of which regulation? A. ECOA B. RESPA C. TILA D. HOEPA - Answer- B. RESPA A twenty-eight-year-old single woman was denied a loan. When she asked for the reason, she was told that the lender had given loans to women her age in the past and no longer would. He had found that within a few years, they were not able to make their monthly payments because they had children and stopped working or cut back to part-time work. Which regulation deems this practice unlawful? A. ECOA B. RESPA C. TILA D. HOEPA - Answer- A. ECOA All of the following would be a good idea for clients to do during the process of obtaining financing, except: A. Purchase the same homeowners insurance policy as the previous homeowner. B. Do research up front to get the right type and amount of insurance C. Insure the home and the property. D. Shop around to get the best insurance rates. - Answer- A. Purchase the same homeowners insurance policy as the previous homeowner. What insurance policy or coverage would be necessary in a situation where a family must rent an apartment for one month while their home is being repaired after a windstorm? A. Personal Liablility Coverage B. Structure Coverage C. Loss of Use Coverage D. Earthquake Insurance - Answer- C. Loss of Use Coverage What insurance policy or coverage would be necessary in a situation where a guest gets carbon monoxide poisoning fro a home that has a gas leak and no carbon monoxide detector and sues the homeowner? A. Personal Liability Coverage B. Structure Coverage. C. Loss of Use Coverage D. Medical Payment Coverage. - Answer- A. Personal Liability Coverage During a pre-purchase counseling session, a client mentions that he wants to make an offer on a home situated near a stream that historically floods in heavy rain storms. Which statement would be an appropriate response for a housing counselor to give him? A. I recommend that you purchase homeowners insurance because it will cover damage done to your home if flooded by water from the nearby stream. B. It is important that you get medical payment coverage if you are going to live near a stream. There are many ways your children could get injured playing in or near the stream, and this coverage will pay for medical bills when that occurs C. I would advise you to purchase earthquake insurance if you decide to close on that house. Earthquakes can often cause massive waves in bodies of water, which could flood nearby homes. With earthquake insurance, any damage done by these types of floods will be covered. D. Before you close on the home, it may be wise to factor in the cost of flood insurance. Since your home will be next to a stream, flood insurance could be critical; however, the added annual expense of flood insurance may make the home an unaffordable option for you. - Answer- D. Before you close on the home, it may be wise to factor in the cost of flood insurance. Since your home will be next to a stream, flood insurance could be critical; however, the added annual expense of flood insurance may make the home an unaffordable option for you. Which best describes the home inspection and closing process? A. Not all closing costs are due at closing B. There is no value in having a real estate attorney or housing counselor review the agreement of sale before closing. C. Home inspectors estimate the value of a home and make certain it is marketable. D. Your clients will receive the keys and the title when they give the seller their earnest money. - Answer- A. Not all closing