HUD Housing Counseling Exam Accurate 100%

Rental Obstacle + Solutions: Low Income - ANSWER -Some Renters reject people whose Rent would be more than 30% of GMI -Solutions -Apply for Housing Assistance -Expand housing search areas -Get a roommate -Move in w/family or friends Strategies for decreasing expenses and debt - ANSWER Prioritize "needs over "wants" -reduce or eliminate "wants" -cancel or downgrade services(e.g. cable, telephone) -limit miscellaneous spending - stick to a shopping list - pay off a loan or credit card - move to more affordable housing - change insurance coverage to lower premiums Fair Credit Reporting Act (FCRA) - ANSWER -Right to know what is your file -Right to dispute incomplete or inaccurate information - Access to your file is limited only to people w/valid need (i.e, creditor, insurer) -You may seek damages from violators (sue) - States have their own rules which additionally project What documents to use when tracking income - ANSWER -Paychecks, direct deposits slips - If self-employed, income + expenses sheet - Additional income checks or cash - Government benefit letters Site to obtain free credit report - ANSWER Chapter 13 bankruptcy - ANSWER Allows individuals w/regular income to develop a plan to repay all or part of their debts over 3 to 5 years can stop foreclose sure proceedings + may delinquent mortgage payments over time Steps to take if victim of identity theft - ANSWER -Place a fraud alert w/the credit reporting agencies - order credit reports to review + identify inaccuracies - create an identify theft report obtain ID theft affidavit from the FTC - File a police report Fair and Accurate credit Transcription Act (FACTA) - ANSWER -Right to free annual credit report - Right to place a fraud alert on your credit file - Receipts may not include entirety of credit card #s Four Steps of Asset building - ANSWER 1.Chose the right bank or credit union account 2. Build savings for emergencies + Large purchase 3. Invest for retirement 4. Take advantage of tax credits Fair credit billing Act (FCBA) - ANSWER -You can dispute billing errors associated w/credit card account - Must be billed in a timely manner % of factors how they affect credit score - ANSWER 35% account history 30% amounts owed 15% length of credit history 10% new credit 10% types of credit used Credit reporting agencies on FICO Score - ANSWER -EQUIFAX - EXPERIAN - TRANS UNION FICO Score - ANSWER -Credit scores often referred to as = Fair Isaac Corporation Range:300-850 Means test - ANSWER A bankruptcy qualification that considers income + equity in assets to determine if a client has the ability to repay part of the debt How to fix: Credit Card maxed / too much debt - ANSWER -Pay down debt + keep balances low - Pay more than minimum - know the balance - check statements How to fix: Delinquencies / collections / Judgments - ANSWER Get current + pay on time moving forward - sett up payments reminders - adjust budget Factors in determining credit score - ANSWER -Payments History - Capacity used - Length of credit history - Type of credit used - New credit Inquires - ANSWER Request initiated by a company or person for a consumer's credit profile information How to fix: Incorrect information on a credit report - ANSWER Dispute inaccuracies: *Notify credit reporting agencies of inaccuracies + provide supporting documentation * keep records of dispute documentation Steps in creating a budget - ANSWER 1. Help client identify short + long-term goals 2. Track income 3. Track expenses 4. Adjust goals + budget *increase income *decrease expenses + debt %. 5. Create client action plan Section of Credit Report: Public Records - ANSWER Items that are listed in the public record, including -bankruptcy - judgments -tax liens - wage garnishments Section of Credit Report: Personal information - ANSWER Consumer identification information, including: -Name - Social Security number - Addresses -Phone # - Employer's Section of Credit Report: Account / Trade line information - ANSWER Info about each consumer credit account, including: - payment history - account dates - credit limit - balances owed Payment History - ANSWER Timely / Late - Payments:Positive: timely - Negative: late - lien, judgment, collection account, charge-off account Type of credit used - ANSWER Positive: Different types of credit show variety - demonstrates that consumers can manage different types of credit Negative: Fever types show limited profile info - higher risk Length of credit history - ANSWER -How long a person has bad credit Positive: Longer credit history provides more info for lenders - lower risk Negative- shorter history provides little to no info for lenders - higher risk Capacity Used - ANSWER -How much of credit available has the person used Positive: low credit utilization = financial management Negative: High credit card balances = poor financial management - maxed out credit cards Strategies to increase income (9) - ANSWER -Find second job -Work Over time -Negotiate higher salary / wage -Sell assets (e.g. car) -Hold a yard/garage sale -Teach a skill / craft/ activity -Sell a craft _Charge rent (adult +dependents living @ home) -Evaluate tax withholding's (if over-with holding) change to increase income received) Items to include when tracking expenses - ANSWER Monthly bills (utilities, cell phone, etc.) All Fixed monthly expenses all cash expenses Seasonal or annual expenses (i.e car registration, gifts, holiday season, vacation) Documents to use when tracking expenses - ANSWER -Bills -Bank statements -Credit cards statements -Records for estimated amount of expected periodic expense Chapter 7 bankruptcy - ANSWER Liquidation bankruptcy -Process of selling non-exempt assets to repay creditors in Chapter 7 bankruptcy -Must meet w/an attorney to determine ability to repay debts - means test Tips for avoiding predatory lending - ANSWER 1.Shop for a loan 2.Ask questions 3.Beware of deals that sound to o good to be true 4. Know and understand you financial situation Credit Score - ANSWER A numerical interpretation of a customer's creditworthiness based on information in his/her credit report How to fix: No credit / Poor credit / Limited Credit - ANSWER -Open a credit card -Secured credit card Items to include when tracking income - ANSWER -Regular salary -Temporary jobs -Unemployment compensation -Public assistance Items not to include when tracking income - ANSWER -Pre -tax payroll deductions -Credit report Things to consider when choosing a bank account - ANSWER Services Fees- account maintenance, wire transfer, check purchasing, money order, negligence fees - overdraft, stop payments, insufficient funds Fun access features-location, ATM'S, online banking, customer service Common Predatory Lending tactics - ANSWER 1. Limited time offers 2. High risk loans (consulting / unclear terms) 3. Higher loan amounts (more than person can afford) 4. High fees or cost 5. False of hidden disclosures 6. Loan flipping (encouraged to refinance existing loans) Strategies for advising clients on investing for retirement - ANSWER -Explain importance of savings for retirement -Highlight the benefits of tax-incentivize accounts Features of a good - Large purchase savings account - ANSWER For large purchase -Limited accessibility -Good returns- *High-interest savings *Money market *Cd Features of a good emergency fund account - ANSWER -Liquid-money can be retrieved w/o penalties -Direct deposit or automatic transfer available -Limited accessibility (not tempted to dip into it) i.e.-interest bearing savings accts. money market accts New Credit - ANSWER Positive: credit applications can lead to new credit accounts or loans, which can establish history over time Negative: too many inquiries or new credit accounts in a short period will raise questions for venders Area Median Income - ANSWER -The midpoint in the family income range for a metropolitan statistical area or for the non-metropolitan parts of a state -Determinate annually by HUD very low, low, moderate, above moderate Capital - ANSWER How much money a borrower has saved to pay a deposit or down payment for the home she/he intends to purchase USDA - ANSWER United States Department of Agriculture rural Development program for people interested in living in eligible rural areas -Low rates, no down payments, low-moderate income -Less than 115% of AMI -Must be w/o adequate housing Capacity - ANSWER Capacity to pay outstanding debt -The consistency of employment + income -Adequacy of income to repay debt -Recurring debts - Frecuency + type of wages Why would you get a 2nd mortgage? - ANSWER If don't have enough for 20 % down payment, might get 2nd mortgage for 205 to ensure that PMI is not required Gross Monthly Income - ANSWER Money earned before taxes + other deductions P I T I A - ANSWER Principal Interest Taxes Insurance Association Dues Private Mortgage Insurance - ANSWER Policy that projects a lender from potential risks when a ho