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HUD Practice Test Complete Set of Questions
and Correct Answers
Which document is most important when working with a client to develop an initial budget as part of a Client Action Plan? - โ
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? - โ
Find a second job A credit report may contain which information? - โ
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? - โ
It increases credit utilization, causing a negative impact on the credit score. Which action would a client take to improve a credit score? - โ
Pay delinquent accounts A client does not receive a written monthly statement from the credit card company. Which credit law could this omission violate? -
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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%. - โ
"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? - โ
File an identity theft report In which situation would a client's responsibilities, recurring costs, and upfront costs be evaluated? - โ
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? - โ
$ Which type of government insured loan was created for financing homes in rural areas? - โ
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? - โ
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? - โ
$ 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)? -
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? - โ
Capital Which describes a homebuyer who would be ineligible as a first-time homebuyer, as defined by most down payment assistance programs? - โ
A client who lost a home to foreclosure two years ago. Which step does a homebuyer complete in the process of purchasing a home? - โ
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? - โ
Determining if homeownership is right for the client Which charge cannot change from the Loan Estimate to the Closing Disclosure? - โ
Fees paid to lender Which is the minimum qualifying credit score for an FHA mortgage if the client made a 3.5% down payment? - โ
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? - โ
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? - โ
Pre-approval
What are key differences between PMI and MIP? - โ
Conventional loans may require PMI, removed at 78% LTV. FHA loans require MIP, removed upon fulfillment of loan terms. A client seeking to purchase is trying to decide between an FHA-insured mortgage and another mortgage insured by private mortgage insurance. Which is a distinguishing difference between these two types of mortgage insurance? - โ
FHA-insured mortgages generally require payment of mortgage insurance premiums for the life of the loan. Many private mortgage insurance programs may allow for their removal after paying down the loan to below a 78% loan-to-value level. Which borrower information is contained in the Uniform Residential Loan Application (URLA)? - โ
Asset information In order to comply with the Know Before You Owe rule, which disclosures were replaced with new versions that more clearly outline mortgage terms to borrowers? - โ
Good Faith Estimate (GFE) and HUD-1 Settlement Statement Which government regulation prohibits a lender from discriminating against a borrower who uses public assistance to qualify for a mortgage loan? - โ
Equal Credit Opportunity Act (ECOA) Which item would affect the cost of earthquake insurance? - โ
Structural material For a client whose most recent rental history is unfavorable, which initial strategy should a housing counselor recommend to increase a potential landlord's willingness to rent to the client? - โ
Complete a tenant responsibilities and obligations course conducted by a housing counselor. Which entity would be most likely to issue a Housing Choice Voucher? - โ
Local housing authority
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HELOC
A potential homebuyer with minimal savings for a down payment and a low credit score is most likely to qualify for which mortgage? - โ
USDA Which is the most significant benefit of using a real estate agent? - โ
Negotiating the sale Which item is critical to consider when working with a client to prepare a household system maintenance plan? - โ
Target replacement date Which strategy most effectively increases a home's energy efficiency? - โ
Increase attic insulation Which best describes the ENERGY STAR program? - โ
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? - โ
Repair caulking on windows. Which should a housing counselor recommend that a client include in a household maintenance plan? - โ
Coverages for home warranty Which item should be included in an emergency preparedness plan? - โ
Identify a meeting location outside the immediate area. A client with limited financial resources wants to improve safety in the home to prepare for natural disasters. Which is the best resource for the client to use in researching this topic? -
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Ready.gov Which would be the best location to identify in a household emergency preparedness plan as a safe place to meet in the event of an evacuation? - โ
A motel in a neighboring community What was the primary purpose of the Making Home Affordable program? - โ
To assist homeowners in avoiding foreclosure The terms Ability to Repay and Qualified Mortgage were defined in regulations implemented by the Consumer Finance Protection Bureau (CFPB) because of what industry wide problem? - โ
Subprime lending Two homeowners are making adjustments to household spending. Their Client Action Plans outline several potential steps. Based on the action steps for each client, what might a housing counselor assume? - โ
Client 2 is more likely to be in either default or imminent default. What should a counselor and tenant focus on when developing an emergency budget? - โ
Increasing income and decreasing expenses A client is delinquent on the mortgage and at risk of default. The client is considering signing the deed over to a real estate investor to avoid foreclosure. What should the housing counselor recommend? - โ
Advise against signing over the deed to a real estate investor as a solution to avoid foreclosure. Which option would be most likely to require that the mortgage is current for eligibility? - โ
Refinance A family suffers a loss of income due to unemployment and is now facing a pending foreclosure. After reviewing the family's budget, the housing counselor learns that the family has a negative cash flow of almost $300. The housing counselor recommends adjusting expenses, which results in a positive cash flow of $400 per month. The family would like to pursue an FHA retention option. They
Which option allows the borrower to avoid foreclosure by disposing of a property for an amount less than the outstanding mortgage balance? - โ
Short Sale Under what circumstance must a servicer refrain from beginning the foreclosure process? - โ
The client has a pending loan modification application. Which does a servicer do in the non-judicial foreclosure process? - โ
Issues a Notice of Default (NOD) to the borrower In which circumstance may a tenant terminate a lease without financial repercussions? - โ
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? - โ
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? - โ
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? - โ
Contact United Way 211 A counselor is working with a client who has recently been evicted. What would be the most appropriate housing referral? - โ
Local emergency shelters
A tenant has a Housing Choice Voucher for a two-bedroom apartment but lives in a three-bedroom apartment and pays the difference in rent. Due to a recent job change, the tenant is behind on rent but wishes to keep the voucher. What should the counselor encourage the client to do? - โ
Move into a two-bedroom unit to reduce costs and negotiate a repayment plan Which practice is a legal exception to the Fair Housing Act? - โ
Making housing operated by a religious organization unavailable to those who are not members of the organization Which practice remained legal after the passage of the Civil Rights Act of 1964? - โ
** Which are protected characteristics under the federal Fair Housing Act? - โ
Race, religion, disability Which is a potential violation of the Fair Housing Act? - โ
An apartment owner only rents ground-level apartments to tenants of Asian ethnicity. A single, gay, African-American parent with four kids is turned away from a property because the landlord does not want the kids to destroy the property. Which protected characteristic of discrimination most likely fits this case? - โ
Familial status Which HUD program provides funding to nonprofits that assist people who may have been victims of housing discrimination? - โ
Fair Housing Initiatives Program (FHIP) When filing a fair housing complaint, why is it important to provide the date of the alleged violation?
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Because complaints are only valid if they are filed within a given period of time While meeting with a housing counselor, a client describes a possible housing discrimination situation. Which is the best way to handle the violation? -
