HUD Practice Test and Correct Answers
1. Which document is most important when working with a client to
develop an initial budget as part of a Client Action Plan?: Pay Stub
2. A client would like to 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
3. A credit report may contain which information?: The number of accounts in
collection status
4. 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
homeownership program that only requires a 1% down
payment with an FHA loan. What might result from the
client closing the credit card accounts?: It increases credit utilization,
causing a negative impact on the credit
score.
1/
16
,5. Which action would a client take to improve a credit score?: Pay
delinquent accounts
6. 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
7. 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%.: "I am unable to determine whether the loan is
predatory, but I suggest you shop around with other lending sources."
8. Which action should a counselor recommend a client take first
after discov- ering identity theft?: File an identity theft report
9. In which situation would a client's responsibilities, recurring costs,
and up- front costs be evaluated?: When weighing housing options
10. A client works 40 hours a week making $15 an hour. What is
the highest monthly mortgage the client can afford based on
2/
16
, income if the client secures a conventional loan?: $728
11. Which type of government insured loan was created for
financing homes in rural areas?: USDA
12. 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 Funds
13. 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?: $736
Use Front-End Ratio
14. 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)?: 30%
15. 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).
3/
16
1. Which document is most important when working with a client to
develop an initial budget as part of a Client Action Plan?: Pay Stub
2. A client would like to 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
3. A credit report may contain which information?: The number of accounts in
collection status
4. 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
homeownership program that only requires a 1% down
payment with an FHA loan. What might result from the
client closing the credit card accounts?: It increases credit utilization,
causing a negative impact on the credit
score.
1/
16
,5. Which action would a client take to improve a credit score?: Pay
delinquent accounts
6. 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
7. 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%.: "I am unable to determine whether the loan is
predatory, but I suggest you shop around with other lending sources."
8. Which action should a counselor recommend a client take first
after discov- ering identity theft?: File an identity theft report
9. In which situation would a client's responsibilities, recurring costs,
and up- front costs be evaluated?: When weighing housing options
10. A client works 40 hours a week making $15 an hour. What is
the highest monthly mortgage the client can afford based on
2/
16
, income if the client secures a conventional loan?: $728
11. Which type of government insured loan was created for
financing homes in rural areas?: USDA
12. 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 Funds
13. 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?: $736
Use Front-End Ratio
14. 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)?: 30%
15. 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).
3/
16
