HUD Practice Test and Correct Answers Verified 2024

Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? - 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? - ANSWER Find a second job A 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 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)? - ANSWER 30% 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). If the client wants to make the minimum down payment for a home priced at $150,000, how much more does the client need to save? - ANSWER $1,750 Under which condition would most down payment assistance programs approve a waiver of the homeownership education requirement? - ANSWER Most will not waive the homeownership education requirement. Which type of assistance administered by a public housing authority allows for location flexibility? - ANSWER Tenant-based vouchers