HUD Practice Test and Correct Answers

Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? Correct Answer: Pay Stub 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? Correct Answer: Find a second job A credit report may contain which information? Correct Answer: The number of accounts in collection status 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? Correct Answer: It increases credit utilization, causing a negative impact on the credit score. Which action would a client take to improve a credit score? Correct Answer: Pay delinquent accounts A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? Correct Answer: Fair Credit Billing Act 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%. Correct Answer: "I am unable to determine whether the loan is predatory, but I suggest you shop around with other lending sources." Which action should a counselor recommend a client take first after discovering identity theft? Correct Answer: File an identity theft report In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? Correct Answer: When weighing housing options A client works 40 hours a week making $15 an hour. What is the highest monthly mortgage the client can afford based on income if the client secures a conventional loan? Correct Answer: $728