HUD - Housing Afforability questions with complete solution

HUD - Housing Afforability questions with complete solution A counseling agency has several clients looking to finance home purchases. All of these clients would like to buy a $100,000 home and are steadily employed. Match each client description on the right to the best loan option for that client on the left. A. VA B. USDA C. FHA D. Conventional ___ 1. Client 1 has $25,000 in savings and a credit score of 740. She plans to keep some savings in reserves and has identified additional funds to cover closing costs. ___ 2. Client 2 has $2,500 in savings and a credit score of 690. Family members have offered to contribute to down payment costs to help him buy the home. ___ 3. Client 3 has $3,500 in savings and has a credit score of 635. She is on active duty with the Army. ___ 4. Client 4 has $2,000 in savings and a credit score of 650. His family makes 60% AMI. He lives in a small, rural town and would like to buy a farm. ANS-(D) Conventional: 1. Client 1 has $25,000 in savings and a credit score of 740. She plans to keep some savings in reserves and has identified additional funds to cover closing costs. (C) FHA: 2. Client 2 has $2,500 in savings and a credit score of 690. Family members have offered to contribute to down payment costs to help him buy the home. (A) VA: 3. Client 3 has $3,500 in savings and has a credit score of 635. She is on active duty with the Army. (B) USDA: 4. Client 4 has $2,000 in savings and a credit score of 600. His family makes 60% AMI. He lives in a small, rural town and would like to buy a farm.2. B. The bank determines when the interest rate adjusts. Another client, Michael, is contemplating applying for an adjustable rate mortgage. All of the following would be accurate and applicable information for his counselor to share with him, except: A. The interest rate can go down, but it is also as likely to go up. B. Michael can request for the interest rate to adjust at any time. C. There are caps on how much the interest rate can adjust. D. If Michael chooses to use his VA benefit, he can take out an ARM. ANS-(B) Michael can request for the interest rate to adjust at any time. The bank determines when the interest rate adjusts. Sara is almost ready to purchase her first home. Which criteria would decrease the likelihood that she could obtain an affordable mortgage? A. She has saved $10,000 and is looking to purchase a home for $150,000. B. Almost 6% of her monthly income goes to paying her student loans. C. Her credit score is 577 due to several collection accounts. D. Her debt-to-income ratio is 33%. ANS-(C) Her credit score is 577 due to several collection accounts. A low credit score will deter most lenders from offering financing to a borrower because they have a history of not handling debt well. Or, lenders may offer financing with a higher interest rate, which can make the mortgage unaffordable. Which statement best describes private mortgage insurance? A. It protects the borrower in case of default due to job loss. B. It can be us