HUD Practice Test Questions for Home Buying and Mortgage Loans, Exams of Advanced Education

Download HUD Practice Test Questions for Home Buying and Mortgage Loans and more Exams Advanced Education in PDF only on Docsity! HUD Practice Test Questions with 100% Correct Answers | Verified | Latest Update Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? - Correct 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? - Correct Answer-Find a second job A credit report may contain which information? - Correct 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? - Correct Answer-It increases credit utilization, causing a negative impact on the credit score. Which action would a client take to improve a credit score? - Correct 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? - Correct 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%. - Correct Answer-"I am unable to determine whether the loan is requirement? - Correct Answer-Most will not waive the homeownership education requirement. Which type of assistance administered by a public housing authority allows for location flexibility? - Correct Answer- Tenant-based vouchers A client's payment history affects which factor of creditworthiness? - Correct Answer-Character Which action may a lender take to determine a borrower's character? - Correct Answer-Call an employer to verify employment A client is in the process of purchasing a home with a sales price of $162,000. The client has a net worth of $50,000, a credit score of 680, and a debt-to-income ratio of 36%. The home has appraised for $155,000. Which factor of creditworthiness will most likely be an obstacle to purchasing the home? - Correct Answer-Collateral When a lender inquires about how much money a borrower has saved for a down payment on a home, what factor is being considered? - Correct Answer-Capital A first-time buyer wants a conventional loan but does not have the assets to qualify. This client may have to purchase with an FHA loan unless the client saves more money. Which of the Four C's of Credit does this involve? - Correct Answer- Capital Which describes a homebuyer who would be ineligible as a first-time homebuyer, as defined by most down payment assistance programs? - Correct Answer-A client who lost a home to foreclosure two years ago. Which step does a homebuyer complete in the process of purchasing a home? - Correct Answer-Get a home inspection A counselor's understanding of the client's spending habits and use of credit are most important in which step of the homebuying process? - Correct Answer-Determining if homeownership is right for the client Which charge cannot change from the Loan Estimate to the Closing Disclosure? - Correct Answer-Fees paid to lender Which is the minimum qualifying credit score for an FHA mortgage if the client made a 3.5% down payment? - Correct Answer-580 A client has saved money for a small down payment and closing costs to purchase a $100,000 home in the city. The client is deciding whether to begin the homebuying process now or continue saving for a larger down payment. Which loan type would provide the highest monthly payment, assuming interest rates and other factors are equal? - Correct Answer-FHA Loan A client, who is the surviving spouse of a military service member, is interested in buying a home. The client now works at a local nonprofit agency, making $36,000 per year. The client has $4,000 in savings and a credit score of 624. If a client has just received a commitment from a lender to provide a loan for a fixed loan amount based on a review of the complete loan application package by an underwriter, in what stage of the lending process is the client? - Correct Answer- Pre-approval increase by $100 a month despite having four months left on the written lease. Which best describes the situation? - Correct Answer-New landlord has to honor the existing lease Which is a typical responsibility of a landlord? - Correct Answer-Repairing a leak in the roof A client is currently renting month to month (tenancy at sufferance). What advice should a housing counselor recommend to better secure the housing? - Correct Answer- Seek a new written lease agreement Which circumstance is generally covered by renter's insurance? - Correct Answer-A pipe burst in the apartment above the tenant's unit and causes water damage to the tenant's personal belongings. Which family is most likely to qualify for the Earned Income Tax Credit (EITC)? - Correct Answer-A individual employed part time in a minimum wage job Delinquency on which type of payment can cause a lien to be placed on a client's property? - Correct Answer-Homeowners association dues Which is a possible outcome for member residents if a homeowners association (HOA) imposes a community assessment? - Correct Answer-Residents would be required to pay a share of expenses related to capital improvements to the common areas. A homeowner has decided to remodel the basement over the next 12 months. The project should cost just under $24,000, and the hope is to borrow the money at a very low interest rate that can be paid off over a longer period of time. Which home financing option would work best? - Correct Answer- HELOC A potential homebuyer with minimal savings for a down payment and a low credit score is most likely to qualify for which mortgage? - Correct Answer-USDA Which is the most significant benefit of using a real estate agent? - Correct Answer-Negotiating the sale Which item is critical to consider when working with a client to prepare a household system maintenance plan? - Correct Answer-Target replacement date Which strategy most effectively increases a home's energy efficiency? - Correct Answer-Increase attic insulation Which best describes the ENERGY STAR program? - Correct Answer-A voluntary program that helps businesses and individuals save money and protect the climate through superior energy efficiency. Which action would most likely increase the energy efficiency of a home? - Correct Answer-Repair caulking on windows. Which should a housing counselor recommend that a client include in a household maintenance plan? - Correct Answer- Coverages for home warranty Which item should be included in an emergency preparedness plan? - Correct Answer-Identify a meeting location outside the immediate area. Which aspect of a loan may a client be able to modify when seeking a loan modification due to a financial hardship because of a divorce? - Correct Answer-Loan Term What information is needed to counsel every client through the loss mitigation process? - Correct Answer-Type of mortgage Why is it important to include a 4506-T form when submitting a loss mitigation package? - Correct Answer-Because it authorizes the servicer to obtain the client's tax returns Which retention option would most likely offer a principal reduction? - Correct Answer-Loan Modification A client who is not behind on the mortgage was recently informed of a reduction of income for two months by the client's employer. The client has an FHA loan and would like to take action as soon as possible to avoid a mortgage delinquency. Which FHA Loss Mitigation option is likely best for this client? - Correct Answer-Informal/Formal Forbearance What loss mitigation option may allow a borrower an FHA Partial Claim? - Correct Answer-FHA-HAMP Loan Modification Which type of organization making an unsolicited offer to avoid foreclosure could indicate a scam? - Correct Answer-A company that offers "government-approved" loan modifications How should a homeowner interpret a letter from a lawyer offering to stop foreclosure proceedings for an upfront fee? - Correct Answer-As a possible scam Which option allows the borrower to avoid foreclosure by disposing of a property for an amount less than the outstanding mortgage balance? - Correct Answer-Short Sale Under what circumstance must a servicer refrain from beginning the foreclosure process? - Correct Answer-The client has a pending loan modification application. Which does a servicer do in the non-judicial foreclosure process? - Correct Answer-Issues a Notice of Default (NOD) to the borrower In which circumstance may a tenant terminate a lease without financial repercussions? - Correct Answer-Tenant's spouse is relocated for a military assignment When a housing counselor is assisting a low-income client in danger of eviction, which referral would be most appropriate? - Correct Answer-Legal aid services Which strategy used by an unemployed client will most likely result in the client moving out of a shelter into permanent affordable housing? - Correct Answer-Participate in the shelter's transitional housing programs. A client recently experienced an unexpected car expense, which resulted in the client using half the rent to pay for the expense. The client, who still has a full-time job, would like to avoid making a late payment. Which resource should a housing counselor recommend first? - Correct Answer-Contact United Way 211 A counselor is working with a client who has recently been evicted. What would be the most appropriate housing referral? - Correct Answer-Local emergency shelters