HUD Certification Exam Study Guide Questions And
Answers Verified 100% Correct
Foreclosure - ANSWER A legal process in which mortgaged property is sold to pay the
loan of a defaulting borrower.
Escrow - ANSWER Funds to be used for specific purposes by parties carrying out a
mutual transaction, deposited with a third party.
Closing Costs - ANSWER Fees for final property transfer that are not included in the
price of the property.
Homeowners Insurance - ANSWER An insurance policy that can provide coverage for
damages to a dwelling and contents that belong to the homeowner.
Front-end Ration - ANSWER A rate that calculates a borrower's housing-related
obligations as a percentage of gross monthly income. AKA - Housing Ratio
Conventional Loan - ANSWER A mortgage loan backed by private lenders. Loans with
a DP less than 20% of purchase price may require private mortgage insurance (PMI)
Principal - ANSWER The amount of money borrowed to buy a house or the amount of
the loan that has not been paid back to the lender.
Mortgage Insurance Premium (MIP) - ANSWER A monthly payment, usually part of the
mortgage payment for FHA loans, paid by a borrower for mortgage insurance.
Private mortgage Insurance (PMI) - ANSWER Insurance policy that protects a lender
from potential risks when a homebuyer pays less than 20% for a down payment.
Ground Rent - ANSWER An arrangement in which the owner of a dwelling or structure
does not own the land on which the structure resides.
Association Dues - ANSWER Charged by community or Homeowners Association to
pay for repairs, upkeep, landscaping, improvements and property management.
Adjusted Gross Income - ANSWER Gross income minus adjustments, or reductions,
that one is eligible for, such as deductions for unreimbursed business expenses, tuition
and fees, and contributions to certain retirement accounts.
, Profit and Loss Statments - ANSWER A summary of revenue, costs, and expenses
incurred during a defined period, such as a fiscal year.
Back-End Ratio - ANSWER A rate that calculates a borrower's total monthly debt,
including housing and other debt obligations, as a percentage of gross monthly income.
Character - ANSWER Credit history, employment history, and housing stability to
determine the likeliness that the borrower will repay their debts
Capacity - ANSWER Lender considers consistency of employment and income,
adequacy of income to repay debt, recurring debts and frequency and type of wages
Capital - ANSWER Lenders inquire about how much money a borrower has saved to
pay a deposit or down payment for the home intended to purchase.
Collateral - ANSWER Lenders often request a borrower to pledge specific property or
assets as collateral to secure repayment of loan.
Front-end ratio for obtaining a conventional loan - ANSWER 28%
Front-end ratio for obtaining an FHA loan - ANSWER 31%
Affordable front-end ratio for renters - ANSWER 30%
Per FHA, you are considered self-employed if you have ___% or greater ownership
interest in a business. - ANSWER 25%
Subprime Mortgage Loans - ANSWER A type of mortgage with less stringent lending
and underwriting terms and conditions, usually offered to borrowers with blemished or
limited credit histories.
Type of mortgage that is a good fit for those that have limited funds for a down payment
and closing costs - ANSWER FHA Mortgage
Type of loan that may be a good fit for those that have a poor credit history and/or are
ineligible for other loans - ANSWER Subprime Mortgage Loan
Type of mortgage may be a good fit for eligible veterans, suitable credit and sufficient
income and have a certificate of eligibility. - ANSWER VA Loan
Type of mortgage may be a good fit for those who want to live in eligible rural areas,
make less than 115% AMI, need flexible credit guidelines, may not have funds for a DP
Answers Verified 100% Correct
Foreclosure - ANSWER A legal process in which mortgaged property is sold to pay the
loan of a defaulting borrower.
Escrow - ANSWER Funds to be used for specific purposes by parties carrying out a
mutual transaction, deposited with a third party.
Closing Costs - ANSWER Fees for final property transfer that are not included in the
price of the property.
Homeowners Insurance - ANSWER An insurance policy that can provide coverage for
damages to a dwelling and contents that belong to the homeowner.
Front-end Ration - ANSWER A rate that calculates a borrower's housing-related
obligations as a percentage of gross monthly income. AKA - Housing Ratio
Conventional Loan - ANSWER A mortgage loan backed by private lenders. Loans with
a DP less than 20% of purchase price may require private mortgage insurance (PMI)
Principal - ANSWER The amount of money borrowed to buy a house or the amount of
the loan that has not been paid back to the lender.
Mortgage Insurance Premium (MIP) - ANSWER A monthly payment, usually part of the
mortgage payment for FHA loans, paid by a borrower for mortgage insurance.
Private mortgage Insurance (PMI) - ANSWER Insurance policy that protects a lender
from potential risks when a homebuyer pays less than 20% for a down payment.
Ground Rent - ANSWER An arrangement in which the owner of a dwelling or structure
does not own the land on which the structure resides.
Association Dues - ANSWER Charged by community or Homeowners Association to
pay for repairs, upkeep, landscaping, improvements and property management.
Adjusted Gross Income - ANSWER Gross income minus adjustments, or reductions,
that one is eligible for, such as deductions for unreimbursed business expenses, tuition
and fees, and contributions to certain retirement accounts.
, Profit and Loss Statments - ANSWER A summary of revenue, costs, and expenses
incurred during a defined period, such as a fiscal year.
Back-End Ratio - ANSWER A rate that calculates a borrower's total monthly debt,
including housing and other debt obligations, as a percentage of gross monthly income.
Character - ANSWER Credit history, employment history, and housing stability to
determine the likeliness that the borrower will repay their debts
Capacity - ANSWER Lender considers consistency of employment and income,
adequacy of income to repay debt, recurring debts and frequency and type of wages
Capital - ANSWER Lenders inquire about how much money a borrower has saved to
pay a deposit or down payment for the home intended to purchase.
Collateral - ANSWER Lenders often request a borrower to pledge specific property or
assets as collateral to secure repayment of loan.
Front-end ratio for obtaining a conventional loan - ANSWER 28%
Front-end ratio for obtaining an FHA loan - ANSWER 31%
Affordable front-end ratio for renters - ANSWER 30%
Per FHA, you are considered self-employed if you have ___% or greater ownership
interest in a business. - ANSWER 25%
Subprime Mortgage Loans - ANSWER A type of mortgage with less stringent lending
and underwriting terms and conditions, usually offered to borrowers with blemished or
limited credit histories.
Type of mortgage that is a good fit for those that have limited funds for a down payment
and closing costs - ANSWER FHA Mortgage
Type of loan that may be a good fit for those that have a poor credit history and/or are
ineligible for other loans - ANSWER Subprime Mortgage Loan
Type of mortgage may be a good fit for eligible veterans, suitable credit and sufficient
income and have a certificate of eligibility. - ANSWER VA Loan
Type of mortgage may be a good fit for those who want to live in eligible rural areas,
make less than 115% AMI, need flexible credit guidelines, may not have funds for a DP
