HUD Housing Counseling Exam
Questions With Correct Answers
Back-end |ratio |- |CORRECT |ANSWER✔✔-The |back-end |ratio |(or |debt-to-income |ratio) |compares
|total |debt |to |gross |monthly |income. |The |client's |only |debt |is |a |$435 |lease |payment, |so |the |
$950 |mortgage |payment |brings |his |total |monthly |debt |to |$1,385. |He |earns |$50,000 |per |year, |
which |equals |$4,166.67 |per |month. |The |client's |total |current |expenses |divided |by |gross |
monthly |income |equals |52%. |The |client's |combined |current |housing |payment |and |car |payment
|divided |by |gross |monthly |income |equals |24%.
Calculation:
Debt: |$435 |+ |950 |= |$1,385
Income: |$50,000 |/ |12 |= |$4,166.67
Back-end |ratio: |$1,385 |/ |$4,166.67 |= |0.33 |or |33% |Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |22 |to |24
Max |Front-End |Ratio/Back-End |Ratio |for |Conventional |Loan |- |CORRECT |ANSWER✔✔-The |
maximum |front-end |ratio |for |a |standard |conventional |loan |is |28%, |and |the |back-end |ratio |is |
36%. |The |front-end |ratio |is |calculated |as |28% |of |the |client's |monthly |income |of |$4,167, |which |
is |$1,167. |The |back-end |ratio |is |calculated |as |36% |of |the |client's |monthly |income |of |$4,167 |
minus |the |client's |monthly |debt |of |$435, |which |equals |$1,065. |Therefore, |the |maximum |loan |
payment |that |the |client |qualifies |for |is |the |lower |of |the |two |numbers, |which |is |$1,065
.Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |11 |to |24
The |client |is |considering |an |FHA |mortgage. |What |is |the |upfront |mortgage |insurance |premium |
(UFMIP) |for |an |FHA |mortgage? |- |CORRECT |ANSWER✔✔-Effective |January |2015, |the |upfront |
mortgage |insurance |premium |(UFMIP) |is |1.75% |for |FHA |mortgages. |The |annual |MIP |for |FHA |
,mortgages |ranges |between |0.8% |and |1.05%. |USDA |loans |charge |an |up-front |Guarantee |Fee |of |
2%.
Reference: |Module |2.2 |Affordable |Housing |Options
Page |Number |13 |to |13
Maximum |Housing |Payment |Calculation |- |CORRECT |ANSWER✔✔-To |calculate |the |maximum |
housing |payment, |multiply |the |appropriate |front-end |ratio |by |the |gross |monthly |income. |The |
front-end |ratio |for |an |EEM |loan |is |33%, |and |the |gross |income |is |$50,000 |divided |by |12, |or |
$4,167 |per |month.Calculation: |0.33 |multiplied |by |$4,167 |equals |$1,375.Multiplying |the |front-
end |ratio |for |a |rental |(30%) |would |result |in |a |payment |of |$1,250.Multiplying |the |traditional |
back-end |ratio |for |EEM |loans |(45%) |would |result |in |a |payment |of |$1,875 |minus |the |debt |of |
$435 |equaling |$1,440. |Therefore, |the |front-end |ratio |applies |because |it |results |in |a |lower |
payment.
Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |11 |to |24
The |client |decides |to |purchase |a |townhouse |through |a |down |payment |assistance |program |
with |a |recapture |clause. |Three |years |later, |the |client |remarries, |and |his |wife |owns |a |single |
family |home. |Which |situation |might |cause |an |accelerated |loan |payment?
A. |Client |moves |to |his |wife's |home |and |rents |his |townhouse |to |a |tenant.
B. |Client |moves |to |his |wife's |home |and |the |townhouse |loan |is |assumed |by |an |eligible |buyer.
C. |Client's |wife |moves |into |the |townhouse |and |rents |her |house |to |a |tenant.
D. |Client's |wife |moves |into |the |townhouse |and |sells |her |house |to |a |qualified |buyer. |- |CORRECT
|ANSWER✔✔-A. |Client |moves |to |his |wife's |home |and |rents |his |townhouse |to |a |tenant.
Many |down |payment |assistance |programs |(DPAs) |require |owner |occupancy. |The |recapture |
clause |is |triggered |when |the |husband |rents |or |sells |the |townhouse, |but |the |loan |can |be |
assumed |by |an |eligible |buyer.
,Which |additional |information |should |the |housing |counselor |request |from |the |client |to |
determine |her |readiness |to |purchase |a |home?
- |Expenses
- |Pre-qualification |letter
- |Current |lease
- |Planned |family |size |- |CORRECT |ANSWER✔✔-Expenses
The |counselor |must |create |a |budget |to |determine |if |the |client |can |afford |to |purchase |a |home,
|and |expenses |must |be |identified |in |order |to |create |a |realistic |budget.Reference: |Module |4.1 |
Pre-Purchase
Page |Number |5 |to |9
Lenders |typically |verify |that |a |borrower |has |been |in |the |same |job |for |how |many |years? |- |
CORRECT |ANSWER✔✔-2
What |demographic |are |FHA |loans |designed |for? |- |CORRECT |ANSWER✔✔-Based |on |the |client's
|income |and |down |payment, |she |is |well |positioned |for |a |conventional |loan |which |offers |the |
most |favorable |terms |for |her |situation. |FHA |or |USDA |loans |are |designed |for |lower |income |
buyers |with |less |funds |available |for |down |payment, |while |a |subprime |loan |is |designed |for |
buyers |with |poor |credit |who |are |ineligible |for |other |loans.
The |client |thinks |her |cost |of |living |is |going |to |be |the |same |if |her |mortgage |payment |and |her |
rental |payment |are |comparable. |What |are |three |recurring |costs |associated |with |
homeownership |that |are |not |part |of |home |rental?
> |Homeowners |insurance, |property |taxes, |home |repairs
> |Car |insurance, |property |taxes, |cable |bill
, > |Property |taxes, |renters |insurance, |utility |bill
> |Utility |bill, |car |insurance, |renters |insurance |- |CORRECT |ANSWER✔✔-Homeowners |insurance,
|property |taxes, |and |home |repairs |are |part |of |home |ownership |expenses. |Other |options |
contain |one |or |more |costs |not |exclusive |to |home |ownership.
Housing |Ratio |Calculation |of |28%
Income: |$56,400 |- |CORRECT |ANSWER✔✔-Using |her |stated |Gross |Annual |Income |of |$56,400 |
and |the |given |Housing |Ratio |of |28% |calculate |her |maximum |mortgage |payment |as |follows: |
$56,400/12=$4,700
$4,700*.28= |$1,316
Which |is |the |minimum |percentage |of |the |purchase |price |that |the |client |needs |to |make |as |a |
down |payment |to |avoid |having |to |pay |mortgage |insurance |with |a |conventional |mortgage?
> |3.50%
> |10%
> |20%
> |22% |- |CORRECT |ANSWER✔✔-With |a |conventional |mortgage, |the |client |needs |to |put |at |least
|20% |down |in |order |to |avoid |having |to |pay |mortgage |insurance. |That |means |the |loan-to-value |
(LTV) |ratio |needs |to |be |80% |or |less.
Which |factor |determines |whether |the |client |will |have |to |pay |private |mortgage |insurance |
versus |mortgage |insurance |premium?
> |Type |of |loan
> |Size |of |loan
> |Loan-to-value |ratio
Questions With Correct Answers
Back-end |ratio |- |CORRECT |ANSWER✔✔-The |back-end |ratio |(or |debt-to-income |ratio) |compares
|total |debt |to |gross |monthly |income. |The |client's |only |debt |is |a |$435 |lease |payment, |so |the |
$950 |mortgage |payment |brings |his |total |monthly |debt |to |$1,385. |He |earns |$50,000 |per |year, |
which |equals |$4,166.67 |per |month. |The |client's |total |current |expenses |divided |by |gross |
monthly |income |equals |52%. |The |client's |combined |current |housing |payment |and |car |payment
|divided |by |gross |monthly |income |equals |24%.
Calculation:
Debt: |$435 |+ |950 |= |$1,385
Income: |$50,000 |/ |12 |= |$4,166.67
Back-end |ratio: |$1,385 |/ |$4,166.67 |= |0.33 |or |33% |Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |22 |to |24
Max |Front-End |Ratio/Back-End |Ratio |for |Conventional |Loan |- |CORRECT |ANSWER✔✔-The |
maximum |front-end |ratio |for |a |standard |conventional |loan |is |28%, |and |the |back-end |ratio |is |
36%. |The |front-end |ratio |is |calculated |as |28% |of |the |client's |monthly |income |of |$4,167, |which |
is |$1,167. |The |back-end |ratio |is |calculated |as |36% |of |the |client's |monthly |income |of |$4,167 |
minus |the |client's |monthly |debt |of |$435, |which |equals |$1,065. |Therefore, |the |maximum |loan |
payment |that |the |client |qualifies |for |is |the |lower |of |the |two |numbers, |which |is |$1,065
.Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |11 |to |24
The |client |is |considering |an |FHA |mortgage. |What |is |the |upfront |mortgage |insurance |premium |
(UFMIP) |for |an |FHA |mortgage? |- |CORRECT |ANSWER✔✔-Effective |January |2015, |the |upfront |
mortgage |insurance |premium |(UFMIP) |is |1.75% |for |FHA |mortgages. |The |annual |MIP |for |FHA |
,mortgages |ranges |between |0.8% |and |1.05%. |USDA |loans |charge |an |up-front |Guarantee |Fee |of |
2%.
Reference: |Module |2.2 |Affordable |Housing |Options
Page |Number |13 |to |13
Maximum |Housing |Payment |Calculation |- |CORRECT |ANSWER✔✔-To |calculate |the |maximum |
housing |payment, |multiply |the |appropriate |front-end |ratio |by |the |gross |monthly |income. |The |
front-end |ratio |for |an |EEM |loan |is |33%, |and |the |gross |income |is |$50,000 |divided |by |12, |or |
$4,167 |per |month.Calculation: |0.33 |multiplied |by |$4,167 |equals |$1,375.Multiplying |the |front-
end |ratio |for |a |rental |(30%) |would |result |in |a |payment |of |$1,250.Multiplying |the |traditional |
back-end |ratio |for |EEM |loans |(45%) |would |result |in |a |payment |of |$1,875 |minus |the |debt |of |
$435 |equaling |$1,440. |Therefore, |the |front-end |ratio |applies |because |it |results |in |a |lower |
payment.
Reference: |Module |2.1 |Renting |vs. |Buying
Page |Number |11 |to |24
The |client |decides |to |purchase |a |townhouse |through |a |down |payment |assistance |program |
with |a |recapture |clause. |Three |years |later, |the |client |remarries, |and |his |wife |owns |a |single |
family |home. |Which |situation |might |cause |an |accelerated |loan |payment?
A. |Client |moves |to |his |wife's |home |and |rents |his |townhouse |to |a |tenant.
B. |Client |moves |to |his |wife's |home |and |the |townhouse |loan |is |assumed |by |an |eligible |buyer.
C. |Client's |wife |moves |into |the |townhouse |and |rents |her |house |to |a |tenant.
D. |Client's |wife |moves |into |the |townhouse |and |sells |her |house |to |a |qualified |buyer. |- |CORRECT
|ANSWER✔✔-A. |Client |moves |to |his |wife's |home |and |rents |his |townhouse |to |a |tenant.
Many |down |payment |assistance |programs |(DPAs) |require |owner |occupancy. |The |recapture |
clause |is |triggered |when |the |husband |rents |or |sells |the |townhouse, |but |the |loan |can |be |
assumed |by |an |eligible |buyer.
,Which |additional |information |should |the |housing |counselor |request |from |the |client |to |
determine |her |readiness |to |purchase |a |home?
- |Expenses
- |Pre-qualification |letter
- |Current |lease
- |Planned |family |size |- |CORRECT |ANSWER✔✔-Expenses
The |counselor |must |create |a |budget |to |determine |if |the |client |can |afford |to |purchase |a |home,
|and |expenses |must |be |identified |in |order |to |create |a |realistic |budget.Reference: |Module |4.1 |
Pre-Purchase
Page |Number |5 |to |9
Lenders |typically |verify |that |a |borrower |has |been |in |the |same |job |for |how |many |years? |- |
CORRECT |ANSWER✔✔-2
What |demographic |are |FHA |loans |designed |for? |- |CORRECT |ANSWER✔✔-Based |on |the |client's
|income |and |down |payment, |she |is |well |positioned |for |a |conventional |loan |which |offers |the |
most |favorable |terms |for |her |situation. |FHA |or |USDA |loans |are |designed |for |lower |income |
buyers |with |less |funds |available |for |down |payment, |while |a |subprime |loan |is |designed |for |
buyers |with |poor |credit |who |are |ineligible |for |other |loans.
The |client |thinks |her |cost |of |living |is |going |to |be |the |same |if |her |mortgage |payment |and |her |
rental |payment |are |comparable. |What |are |three |recurring |costs |associated |with |
homeownership |that |are |not |part |of |home |rental?
> |Homeowners |insurance, |property |taxes, |home |repairs
> |Car |insurance, |property |taxes, |cable |bill
, > |Property |taxes, |renters |insurance, |utility |bill
> |Utility |bill, |car |insurance, |renters |insurance |- |CORRECT |ANSWER✔✔-Homeowners |insurance,
|property |taxes, |and |home |repairs |are |part |of |home |ownership |expenses. |Other |options |
contain |one |or |more |costs |not |exclusive |to |home |ownership.
Housing |Ratio |Calculation |of |28%
Income: |$56,400 |- |CORRECT |ANSWER✔✔-Using |her |stated |Gross |Annual |Income |of |$56,400 |
and |the |given |Housing |Ratio |of |28% |calculate |her |maximum |mortgage |payment |as |follows: |
$56,400/12=$4,700
$4,700*.28= |$1,316
Which |is |the |minimum |percentage |of |the |purchase |price |that |the |client |needs |to |make |as |a |
down |payment |to |avoid |having |to |pay |mortgage |insurance |with |a |conventional |mortgage?
> |3.50%
> |10%
> |20%
> |22% |- |CORRECT |ANSWER✔✔-With |a |conventional |mortgage, |the |client |needs |to |put |at |least
|20% |down |in |order |to |avoid |having |to |pay |mortgage |insurance. |That |means |the |loan-to-value |
(LTV) |ratio |needs |to |be |80% |or |less.
Which |factor |determines |whether |the |client |will |have |to |pay |private |mortgage |insurance |
versus |mortgage |insurance |premium?
> |Type |of |loan
> |Size |of |loan
> |Loan-to-value |ratio
