Impact of Payment History, Amounts Owed, and Credit History on Credit Scores, Exams of Nursing

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HUD Exam Prep| 196 QUESTIONS| WITH COMPLETE SOLUTIONS 2024 Graded (A+). % Impact of Account Payment History on Credit Score - ✅✅✅35% portion of credit score based on the payment history of accounts, including late payments, delinquencies, judgments, and liens % Impact of Amounts Owed on Accounts on Credit Score - ✅✅✅30% portion of score based on the ratio of total credit extended to the amount of credit owed % Impact of Length of Credit History on Credit Score - ✅✅✅15% portion of score based don the overall length of credit history in the report, as well as average age of accounts % Impact of Types of Credit Used on Credit Score - ✅✅✅10% portion of score based on the variety of accounts % Impact of New Credit on Credit Score - ✅✅✅10% portion of score based on the number of recent credit INQUIRIES All of the following would help a counselor develop a realistic household budget, except: Payment information for a paid-off car Amount spent on groceries Rent payment information Monthly cable bill - ✅✅✅A All of the following are reasons why it is important for a client to track income and expenses before finalizing a budget, except: It helps show clients that they actually spend less on some expenses than they think. It helps identify spending habits. It helps show clients that their spending and expenses are out of control. It helps define realistic and attainable goals and timelines. - ✅✅✅C Which of the following is a "want" and not a "need"? Health care premium Car insurance Gym membership Rent - ✅✅✅C All of the following are effective ways to decrease expenses, except: Cancel insurance policy Cancel cable service Stick to a shopping list Conserve energy in the home - ✅✅✅A All of the following are effective strategies to increase income, except: Work over time Teach yoga Find a second job Factor in an anticipated raise - ✅✅✅D Rebecca's next appointment is with Ray, a client who recently started a new job and wants to buy a car to cut down on his commute. Rebecca reviews documents that Ray brought to the counseling session and determines that Ray makes about $1,900 each month after taxes. He pays his bills every month and covers his other expenses, but he never has any Inquiries Account information - ✅✅✅D 1.2.5) Which section of a credit report will contain information about how to correct inaccuracies? Personal information Consumer rights Public records Inquiries Account information - ✅✅✅B 1.2.6) Indicate which of the following concepts would generate a positive effect on a credit report and which would have a negative effect: Paying bills early Filing for bankruptcy Applying for a new credit card every month High credit card balances - ✅✅✅Positive Effect on Credit Report A- Negative Effect on Credit Report B-C-D 1.2.9) Place the letters in the correct sequence from the MOST important factor to the LEAST important factor that impacts the determination of a credit score. Amount of total credit used Number of inquiries on record History of delinquent payment Length of time accounts have been established - ✅✅✅Most Important to Least Important C-A-D-B 1.2.10) Where should a client go to obtain free credit reports? www.freecreditreport.com www.myfico.com www.annualcreditreport.com www.experian.com - ✅✅✅C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. Amy sees a charge she did not make on her credit card statement and wants to dispute it. Fair Credit Reporting Act (FCRA) Fair Credit Billing Act (FCBA) Fair and Accurate Credit Transactions Act (FACTA) - ✅✅✅B 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 2. Peter wants to dispute inaccurate information in his credit report. Fair Credit Reporting Act (FCRA) Fair Credit Billing Act (FCBA) Fair and Accurate Credit Transactions Act (FACTA) - ✅✅✅A 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 3. Jen has been the victim of identity theft and wants to place a fraud alert on her credit file. Fair Credit Reporting Act (FCRA) Fair Credit Billing Act (FCBA) Fair and Accurate Credit Transactions Act (FACTA) - ✅✅✅C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 4. Mary wants to review her credit report for free. Fair Credit Reporting Act (FCRA) Fair Credit Billing Act (FCBA) Fair and Accurate Credit Transactions Act (FACTA) - ✅✅✅C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 5. Matt wants to limit his employers' access to his credit report. Fair Credit Reporting Act (FCRA) Fair Credit Billing Act (FCBA) Fair and Accurate Credit Transactions Act (FACTA) - ✅✅✅A 1.2.7) Match the correct term to definition: ___ 1. Ratio of total credit extended to the amount of credit owed Account History Amounts Owed Length of Credit History Types of Credit Used Types of Credit Used New Credit - ✅✅✅C 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 3. Kate's credit report displays several judgments and collection accounts. Account History Amounts Owed Length of Credit History Types of Credit Used New Credit - ✅✅✅A 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 4. Chris has three credit cards but no other accounts on his report. Account History Amounts Owed Length of Credit History Types of Credit Used New Credit - ✅✅✅D 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 5. April has applied for and received several credit cards and loans in the past six months, talking with a new lender each month. Account History Amounts Owed Length of Credit History Types of Credit Used New Credit - ✅✅✅E 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. Roger has maxed out his credit card. Review budget to help find funds so that all monthly payments can become current. Make more than the minimum payment to pay down the balances. Apply for a secured credit card to establish history. Notify credit reporting agencies. - ✅✅✅2 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. B. Molly is a recent college graduate trying to apply for her first credit card but has been denied. Review budget to help find funds so that all monthly payments can become current. Make more than the minimum payment to pay down the balances. Apply for a secured credit card to establish history. Notify credit reporting agencies. - ✅✅✅3 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. C. . Chris sees that a bankruptcy on his credit report actually belongs to his cousin, who has the same name. Review budget to help find funds so that all monthly payments can become current. Make more than the minimum payment to pay down the balances. Apply for a secured credit card to establish history. Notify credit reporting agencies. - ✅✅✅4 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. Kate's credit report displays several delinquencies, and she has received notices for repossession of her car. Review budget to help find funds so that all monthly payments can become current. Make more than the minimum payment to pay down the balances. Apply for a secured credit card to establish history. Notify credit reporting agencies. - ✅✅✅1 1.2.13) Which complies with fair credit laws? An employer can check a credit report at any time. A vendor can display part of the credit card number on the sales receipt. A credit reporting agency can list information about a collection over eight years old. A creditor can acknowledge a consumer dispute after two months. - ✅✅✅B Repairing the transmission on a car - ✅✅✅D 1.3.9) Indicate the expense best paid for with (A)emergency fund or (B) short-term large purchase fund. ___ School Trips ___ Birthday Gifts ___ Living Expenses (During Unemployment) ___ Medical Bill ___ Electronics ___ Car Repair - ✅✅✅Emergency Fund: -Living Expenses during unemployment -Medical Bill -Car Repair Short-Term Large Purchase -School Trips -Birthday Gifts -Electronics 1.3.10) To explain the importance of establishing a retirement fund to Alexis, you can present all of the following arguments, except: Her company might "match" a portion of the retirement funds that she contributes. She could benefit from certain tax incentives. She could borrow against the retirement investment if she has an immediate need for cash. Her investment could grow more if she begins investing earlier. - ✅✅✅C 1.3.11) Which of the following information would be relevant to ask Richard in the session to determine if he is eligible for any of the tax credits outlined in this module 1.3? Where does he live? How is he submitting his taxes? Does he spend money on childcare? What is his credit limit? - ✅✅✅C 1.3.12) Carlos has two children under the age of three that attend daycare, makes minimum wage at his job, & has not taken any courses beyond high school. He is likely eligible for all of the following tax credits, except: Earned Income Tax Credit (EITC) Child and Dependent Care Credit Educational Credit - ✅✅✅C 1.4.1) Steps to Protect against Identity Theft Initiate a fraud alert. Shred financial documents. Cancel credit cards and order new bank cards. File a police report. Review bank and credit card statements. Contact the FTC. Safeguard personal identity information - ✅✅✅B-E-G 1.4.1) Steps to Take after Identity Theft Initiate a fraud alert. Shred financial documents. Cancel credit cards and order new bank cards. File a police report. Review bank and credit card statements. Contact the FTC. Safeguard personal identity information - ✅✅✅A-C-D-F 1.4.2) All of the following are immediate steps a client should take in the event of identity theft, except: Create an identity theft report. Contact the insurance company. Order credit reports from the credit reporting agencies. Place a fraud alert. - ✅✅✅B 1.4.3) In some cases, bankruptcy may be the best option for a client. Which of the following options would be the least appropriate for a housing counselor to present as an alternative? Debt management plan (DMP) Household budget adjustment Loan modification Negotiation with creditors Wait seven years for accounts to drop from credit report - ✅✅✅E 1.4.4) Which feature belongs with Chapter 7 bankruptcy Liquidation of assets Allows clients to retain certain secured debts, such as a house or car Involves a repayment plan Requires a means test May be a better option for a client with no assets May be a requirement for a client with regular income - ✅✅✅1-4-5 1.4.6) match the Discussion Topics with the subject that the client has raised. ___ 5. Client cannot obtain credit despite knowledge that s/he has no negative accounts Discussion about Predatory Lending Discussion about Bankruptcy - Chapter 13 Discussion about Identity Theft Discussion about Bankruptcy - Chapter 7 - ✅✅✅C 2.1.1) Determine which housing option appears best for each client. Mark "A" for renting and "B" for buying. ___ 1. Bob is averse to financial risks. ___ 2. Jan has saved a significant amount of money in order to comfortably pay a down payment and closing costs. ___ 3. Jenny really enjoys interior design and would like to make her home exactly how she wants it. ___ 4. Rachel takes great satisfaction in doing her own home repairs. ___ 5. Jimmy has a nine-month contract with his current job. ___ 6. Eva has heard that the neighborhood where she is looking at houses does not have the best schools, but she wants to give it a try. ___ 7. Ben is meticulous in his taxes and strives to get any tax deduction possible. - ✅✅✅1- A 2- B 3- B 4- B 5- A 6- A 7- B 2.1.2) If Rebecca's client, Ben, obtains a mortgage for $90,000, which is the most likely amount that he will pay for closing costs? $1,000 $3,500 $7,000 $10,000 - ✅✅✅B Equal Credit Opportunity Act (ECOA) - ✅✅✅Federal law requiring lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs Enforced by the Federal Trade Commission FCRA = Fair Credit Reporting Act - ✅✅✅-right to know what is in your file -right to dispute incomplete or inaccurate info -access to your file is limited -you may seek damages from violators -additional State Rights FCBA = Fair Credit Billing Act - ✅✅✅-You can dispute billing errors associated with your credit card account. -You must be billed in a timely manner. FACTA = Fair & Accurate Credit Transaction Act - ✅✅✅-You have the right to a free annual credit report. -You have the right to place a fraud alert on your credit file. -Credit card numbers must be truncated so the full number is not visible on receipts. Closing Costs average between _______ of the home purchase price. - ✅✅✅3 to 4% 2.1.3) All of the following are true statements about upfront costs associated with renting & buying, except: Renters generally pay a security deposit upon signing a lease. The average cost due upon signing a lease for a rental is typically 20% of the monthly rent. Closing costs are typically comprised of lender fees, discount points, title insurance, home inspection fees, escrow deposit, property taxes, private mortgage insurance, and attorney's fees. A client who desires to purchase a home that costs $150,000 could be required to pay $7,000 in standard closing costs - ✅✅✅B What is the affordable Front-End Ratio for conventional loan? - ✅✅✅28% What is the Back-End Ratio for conventional loan to qualify for a mortgage? - ✅✅✅36% What is the affordable Front-End Ratio for FHA loan? - ✅✅✅31% What is the Back-End Ratio for FHA loan to qualify for a mortgage? - ✅✅✅43% What is the affordable Front-End Ratio for renters? - ✅✅✅30% What is the maximum Back-End Ratio for FHA Energy Efficient Mortgage? - ✅✅✅45% Formula for Front-End Ratio - ✅✅✅= Monthly Housing Expenses/Gross Monthly Income What are Monthly Housing Expenses? - ✅✅✅Principle Interest Taxes 2.1.9) If the Smiths decide to apply for a new loan to buy the more affordable home, which would support the approval of their application? Insufficient capital to cover the down payment Poor credit history Inconsistent employment High gross annual income - ✅✅✅D 2.2.1) Sample Credit Ranges: Excellent: 720+ | Good: 660-719 | Fair: 620-659 Poor: 619 and below ___ 1. Client 1 has $25,000 in savings and a credit score of 740. She plans to keep some savings in reserves and has identified additional funds to cover closing costs. Client would like to buy a $100,000 home and is steadily employed. Select the best loan option to finance home purchase for the client. VA USDA FHA Conventional - ✅✅✅D 2.2.1) Sample Credit Ranges: Excellent: 720+ | Good: 660-719 | Fair: 620-659 Poor: 619 and below ___ 2. Client 2 has $2,500 in savings and a credit score of 690. Family members have offered to contribute to down payment costs to help him buy the home. Client would like to buy a $100,000 home and is steadily employed. Select the best loan option to finance home purchase for the client. VA USDA FHA Conventional - ✅✅✅C 2.2.1) Sample Credit Ranges: Excellent: 720+ | Good: 660-719 | Fair: 620-659 Poor: 619 and below ___ 3. Client 3 has $3,500 in savings and has a credit score of 635. She is on active duty with the Army. Client would like to buy a $100,000 home and is steadily employed. Select the best loan option to finance home purchase for the client. VA USDA FHA Conventional - ✅✅✅A 2.2.1) Sample Credit Ranges: Excellent: 720+ | Good: 660-719 | Fair: 620-659 Poor: 619 and below ___ 4. Client 4 has $2,000 in savings and a credit score of 600. His family makes 60% AMI. He lives in a small, rural town and would like to buy a farm. Client would like to buy a $100,000 home and is steadily employed. Select the best loan option to finance home purchase for the client. VA USDA FHA Conventional - ✅✅✅B 2.2.2) Another client, Michael, is contemplating applying for an adjustable rate mortgage. All of the following would be accurate and applicable information for his counselor to share with him, except: The interest rate can go down, but it is also as likely to go up. Michael can request for the interest rate to adjust at any time. There are caps on how much the interest rate can adjust. If Michael chooses to use his VA benefit, he can take out an ARM. - ✅✅✅B 2.2.3) Sara is almost ready to purchase her first home. Which criteria would decrease the likelihood that she could obtain an affordable mortgage? She has saved $10,000 and is looking to purchase a home for $150,000. Almost 6% of her monthly income goes to paying her student loans. Her credit score is 577 due to several collection accounts. Her debt-to-income ratio is 33%. - ✅✅✅C 2.2.4) Which statement best describes private mortgage insurance? It protects the borrower in case of default due to job loss. It can be used for FHA mortgages. It always includes an upfront premium and monthly charge. It protects the lender in case the borrower defaults. - ✅✅✅D National Origin - ✅✅✅A 3.1.5) Which protected characteristic is being discriminated against ___ 2. A lender only offers adjustable rate mortgages with steep interest rates to Afghanis, but this same lender offers more flexible financing to all other loan applicants. Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅G 3.1.5) Which protected characteristic is being discriminated against ___ 3. A realtor shows an Asian Indian family housing only in Asian Indian neighborhoods and refuses to show the family houses in predominantly white neighborhoods. Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅B 3.1.5) Which protected characteristic is being discriminated against ___ 4. A landlord charges female tenant applicants a higher security deposit than male applicants Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅E 3.1.5) Which protected characteristic is being discriminated against ___ 5. A property manager provides a rental unit of inferior quality to a man with a beard, which is kept to adhere to spiritual believes. Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅C 3.1.5) Which protected characteristic is being discriminated against ___ 6. An apartment imposes higher rent to individuals who describes themselves as having a debilitating paranoid personality disorder Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅D 3.1.5) Which protected characteristic is being discriminated against ___ 7. A Chinese American individual with light skin fails to process an offer for the sale of a home to a Chinese American with a darker tone Familial Status Race Religion Disability Sex Color National Origin - ✅✅✅F 3.1.6) Below is a list of scenarios. Place an "A" next to scenarios that correspond with Prohibited Practice and a "B" next to scenarios corresponding with Legal Practice. Imposing different terms or conditions on a loan Suggesting that a potential client review information about all different loan types Discriminating in appraising property - ✅✅✅C 3.1.11) Below is a list of scenarios. Place an "A" next to scenarios that correspond with Prohibited Practice and a "B" next to scenarios corresponding with Legal Practice. ___ 1. A mortgage lender denies a home loan to an applicant with a disability because his credit score is too low and approves an applicant without a disability that has a higher credit score. ___ 2. A home insurance company offers a female applicant that needs provisions for flood insurance a more expensive policy than a male applicant who does not need flood insurance. ___ 3. A home insurance company offers female applicants policies that are sub-standard and not competitive with the market but offers male applicants standard policies with competitive terms. ___ 4. A mortgage lender offers steeper interest rates and different terms and conditions to borrowers who are Native American than to those who are white. - ✅✅✅1- B 2- B 3- A 4- A 3.2.1) Which HUD program provides annual funding to state and local agencies that enforce fair housing laws that are substantially equivalent to the Fair Housing Act? These funds go toward an agency's capacity building, administrative costs, investigative and enforcement efforts, training, and other projects designed to support enforcement of fair housing laws. Fair Housing Initiatives Program (FHIP) Fair Housing Assistance Program (FHAP) - ✅✅✅B 3.2.2) Which HUD program provides funding to fair housing organizations and nonprofits that assist people who may have been victims of housing discrimination? Fair Housing Initiatives Program (FHIP) Fair Housing Assistance Program (FHAP) - ✅✅✅A 3.2.3) Select which phase of the investigation and charge process is described below: ___ 1. HUD interviews the complainant; the respondent and pertinent witnesses; collects relevant documents and/or conducts site visits; and continually offers and engages conciliation. Intake Filing Investigation Pre-determination Conciliation - ✅✅✅C 3.2.3) Select which phase of the investigation and charge process is described below: ___ 2. After a complainant submits a complaint, an intake specialist reviews the information to determine if the allegation involves a possible violation of Fair Housing Act and is within HUD's jurisdiction Intake Filing Investigation Pre-determination Conciliation - ✅✅✅A 3.2.3) Select which phase of the investigation and charge process is described below: ___ 3. HUD attempts to achieve a just resolution of the complaint before all the evidence has been gathered in the investigation process Intake Filing Investigation Pre-determination Conciliation - ✅✅✅D 3.2.3) Select which phase of the investigation and charge process is described below: ___ 4. HUD sends a notification to the aggrieved person acknowledging the filing and advising the aggrieved person of the time limits and choices; sends a notice to the respondent, no later than 10 days of when the official complaint is filed; and assigns the complaint for investigation by HUD or refers the complaint to state or local proceedings. Intake Filing Investigation Pre-determination Conciliation - ✅✅✅B 3.2.4) All are examples of how entities that participate in HUD housing or urban development programs can affirmatively further fair housing, except: The 4C's of Credit refer to: - ✅✅✅Character Capacity Capital Collateral Under 4C's of Credit, what is Character? - ✅✅✅credit history employment history housing stability Under 4C's of Credit, what is Capacity? - ✅✅✅Consistency of employment & income Adequacy of income to repay debt Recurring debts Frequency & type of wages Under 4C's of Credit, what is Capital? - ✅✅✅Deposit or Down Payment Under 4C's of Credit, what is Collateral? - ✅✅✅Property or Assets Types of Mortgage Loans - ✅✅✅1. Conventional Mortgage Loans -mortgage amounts either conforming (fed set limit), non-conforming/jumbo (above fed limits) Subprime Mortgage Loans -for borrowers with poor credit -high interest rates & monthly mortgage payment Government Insured Loans -FHA, VA, USDA Conventional/prime mortgage is good for those who: - ✅✅✅- Have a good credit history. Have funds for a down payment (typically 20% of the purchase price) and closing costs. Meet lender-specific qualification requirements regarding income, credit score, and other factors. Subprime mortgage is good for those who: - ✅✅✅- Have a poor credit history. Are ineligible for other loans. FHA-insured mortgages may be good for those who: - ✅✅✅- Have limited funds for down payment & closing costs May not qualify for a conventional mortgage loan due to flawed credit history, bankruptcy, or high debt-to-income ratios. VA mortgage may be a good fit for those who: - ✅✅✅- Are eligible veterans, active duty personnel, & surviving spouses. Have suitable credit and sufficient income. Have a valid Certificate of Eligibility. USDA mortgage issued by private lender may be a good fit for those who: - ✅✅✅- Want to live in eligible rural areas, as defined by the USDA. -Make less than 115% of Area Median Income, or AMI (low-moderate income) May need flexible credit guidelines or need to rely on non-traditional credit for qualification. May not have funds for a down payment. Must be without adequate housing USDA direct loans funded directly by the government may be good fit for those who: - ✅✅✅- Homebuyer income must be less than 80% of AMI (low-very low income) Homebuyers are unable to obtain other financing but have reasonable credit. Loan terms can go up to 33 years, though exceptions allow for loan terms up to 38 years if certain income criteria apply Fixed rate mortgage - ✅✅✅typically paid off in 30 years, has an interest rate that does not fluctuate. It stays the same over the life of the loan. You can count on your payments being the same for the next 30 years. Some people get a 15-year or other term, but these have higher monthly payments since you're paying off the mortgage faster Adjustable rate mortgages - ✅✅✅have an initial interest rate that applies for a defined period of time (typically from one month to 10 years) and then adjusts at pre-determined intervals for the life of the loan. Interest rates can increase or decrease when they are adjusted, but there are caps on how large an adjustment can be. Overview of FHA mortgage loans - ✅✅✅Back-end Ratio 43% Mortgage Insurance: up-front + annual premium Non-traditional credit accepted Down payment 3.5% & can be gifted LTV 96.5% Credit Score min. 580, mostly 640 Grant/subsidy is allowed Overview of VA mortgage loans - ✅✅✅Back-end Ratio 43% Guaranty Fee (mortgage ins.) financed into loan Non-traditional credit accepted Down payment 0% LTV 100% -Credit score above 620 -Household income cannot exceed 120% of the AMI adjusted for family size: 1=$36K, 2=$41k, 3=$46k, 4=$51k, 5=$56K If a client qualifies, place an "A" before the description. If a client does not qualify, place a "B." ___ 3. Client 3 is married with two children, makes $50,000 a year, and has a credit score of 640. - ✅✅✅A 2.2.6) Down Payment Assistance Program Borrower eligibility: -Must be first-time homebuyer & occupy property as primary residence -Credit score above 620 -Household income cannot exceed 120% of the AMI adjusted for family size: 1=$36K, 2=$41k, 3=$46k, 4=$51k, 5=$56K If a client qualifies, place an "A" before the description. If a client does not qualify, place a "B." ___ 4. Client 4 wants to buy an investment property - ✅✅✅B 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 1. Is interested in learning how to do home repairs - ✅✅✅A 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 2. May need to relocate to live closer to an aging parent in the next year or two - ✅✅✅B 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 3. Earns an annual gross income of $26,000 in a region where the average home price is $108,000 - ✅✅✅B 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 4. Paid bills late four times in the last year - ✅✅✅B 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 5. Earns an annual gross income of $39,000 in a region where the average home price is $98,000 - ✅✅✅A 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 6. Has credit score of 700 - ✅✅✅A 4.1.1) Determine if the following client descriptions indicate whether the client is ready to buy a home or may not be ready to buy a home. Select: Ready to buy a home May not be ready to buy a home ___ 7. Changed jobs three times over the past two years, switching from administrative services to customer service to retail - ✅✅✅B 4.1.2) Which factor is best for housing counselors to use when determining how much a client can afford to spend on purchasing a home? Debt-to-income ratios Annual gross income Savings Options A, B, and C None of the above - ✅✅✅D 4.1.3) Match the homebuying team member A real estate agent or broker is typically an attorney or works for an escrow company. S/he oversees the final transaction in property purchase, at which time the title is transferred from the seller to the buyer. The lender requires an assessment of the home by a home inspector before loan approval. An insurance agent is also known as a settlement agent. A home inspector is generally paid by the buyer. - ✅✅✅D Earnest Money - ✅✅✅When buyers and sellers reach an agreement on a price and terms of the deal, the buyers will give the sellers a check with earnest money. The purpose of the check is to prove the buyers' sincere intent to purchase the home. The amount offered typically ranges by region, from as low as 1% of the sales price to as high as 10%, and can be negotiated. A higher amount shows greater intent to buy What are the 9-Steps to Homebuying Process - ✅✅✅1- Determine if homeownership is right for the client (housing counselor assistance) 2- Figure out how much the client can afford (housing counselor assistance) 3- Help clients understand their rights (housing counselor assistance) 4- Shop for home (homebuying team) 5- Make offer (homebuying team) 6- Obtain financing (homebuying team) 7- Get home inspection (homebuying team) 8- Purchase homeowner's insurance (homebuying team) 9- Close on home (homebuying team) Loan Origination Fees - ✅✅✅A charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and varies with the lender and type of loan. A loan origination fee of 1 to 2% of the mortgage amount is common. Discount Points - ✅✅✅A type of pre-paid interest normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount. The borrower pays them to reduce the interest rate on a loan. You can purchase a lender-determined number of discount points to give you a lower rate and lower monthly mortgage payment. 4.1.5) Which piece of advice would you give to clients as they begin the process of obtaining financing? Never speak with lenders before settling on a home. Have all potential lenders pull credit within a 30-day window. Mortgages with adjustable rates are always best. Choose whichever lender is most prompt in returning your phone calls. - ✅✅✅B What is the key mortgage loan application document? Hint: outlines your client's financial history - ✅✅✅Form 1003 Uniform Residential Loan Application (URLA) What are the components/sections to the URLA - ✅✅✅1-Loan Info 2-Property Info 3-Personal Info 4-Income Info 5-Asset Info 6-Debt Info 7-Additional Real Estate Info 8-Signatures What is in the Loan Information section of the URLA - ✅✅✅Information such as amortization length and type (fixed or ARM), the interest rate, and occupancy type (e.g., owner occupied, investment property). What is in the Property Information section of the URLA - ✅✅✅Information such as property address, year built, number of units, and property type. What is in the Personal Information section of the URLA - ✅✅✅Information such as address, birthday, social security numbers, and marital status. What is in the Income Information section of the URLA - ✅✅✅Information such as income from employment, social security benefits, dividends, and child support. Note: borrower may choose not to have child support considered for repayment of a mortgage loan What is in the Debt Information section of the URLA - ✅✅✅Information such as student loans, liabilities on credit report, and alimony. What is in the Asset Information section of the URLA - ✅✅✅Information such as deposit, bank account information, investments, retirement funds, and TILA governs the required mortgage transaction disclosures that describe important conditions and terms of credit. TRID = TILA-RESPA Integrated Disclosure Rule - ✅✅✅Federal law amending regulations under RESPA (Regulation X) and TILA (Regulation Z), effective as of October 3, 2015. Requires easier-to-use mortgage disclosure forms that clearly outline the terms of a mortgage to the borrower. forms = Loan Estimate & Closing Disclosure HOEPA = Home Ownership and Equity Protections Act - ✅✅✅Federal law enforcing special disclosure requirements and restrictions on terms for loans that meet high-cost mortgage tests. If the loan is considered to be a high-cost loan housing counseling will be required and additional disclosures must be provided to consumer. In addition new restrictions were put in place to disallow certain loan features & practices that led to past abuses. 4.1.8) A client is shopping for a loan and submits a loan application to a lender. The client asks for information about possible settlement costs, but the lender says that he needs to see the purchase contract in order to move forward with the process. The lender should have provided which item? URLA ATR/QM Loan Estimate Closing Disclosure - ✅✅✅C 4.1.9) A client spoke with five lenders. Four of the five lenders quoted interest rates between 4.1% and 4.6%. One lender mentioned a 3.1% interest rate if she signed for it within the next 36 hours. She was very interested in this loan, so she asked for more information (e.g., conditions and fees). The lender provided some information about the loan, but nothing included the APR. Which regulation deems this practice unlawful? ECOA RESPA TILA HOEPA - ✅✅✅C Loan Estimate - ✅✅✅According to TRID this new form must be provided to consumers at least 3-business days after loan application is submitted. Form Includes : Loan terms, closing costs, adjustable interest rate & payment table if applicable, contact info Closing Disclosure - ✅✅✅According to TRID this new form must be provided to consumers at least 3-business days before closing. Form includes: actual terms & transaction costs, final loan terms, final closing costs, cash to close, 4.1.10) A certain mortgage company encourages all its clients to use a specific appraiser. The appraisers give the mortgage company $100 for every one of its clients who comes to them. If the mortgage company does not tell clients about the payment it receives for referrals, this is a breach of which regulation? ECOA RESPA TILA HOEPA - ✅✅✅B 4.1.11) A twenty-eight-year-old single woman was denied a loan. When she asked for the reason, she was told that the lender had given loans to women her age in the past and no longer would. He had found that within a few years, they were not able to make their monthly payments because they had children and stopped working or cut back to part-time work. Which regulation deems this practice unlawful? ECOA RESPA TILA HOEPA - ✅✅✅A What two HUD-prepared pamphlets on home inspection must be provided to customers in housing counseling session or homebuyer education workshop - ✅✅✅1- For Your Protection Get a Home Inspection 2- 10 Questions to Ask a Home Inspector 4.1.12) All of the following would be a good idea for clients to do during the process of obtaining financing, except: Purchase the same homeowners insurance policy as the previous homeowner. Do research up front to get the right type and amount of insurance. Insure the home and the property. Shop around to get the best insurance rates - ✅✅✅A