HUD Practice Test and Correct Answers

credit report may contain which information? -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? -ANSWER- It increases credit utilization, causing a negative impact on the credit score. Which action would a client take to improve a credit score? -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? -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%. -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? -ANSWER- File an identity theft report In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? -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? -ANSWER- $728 Which type of government insured loan was created for financing homes in rural areas? -ANSWER- USDA 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? -ANSWER- Emergency Funds 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? -ANSWER- $736 Use Front-End Ratio