Hud 2024 Updated Exam Q&A

Hud 2024 Updated Exam Q&A A client, who is a divorced local school teacher, is interested in purchasing his first home. He wishes to stay in the same neighborhood where he now lives and to purchase a home in the low-$100,000 range. He currently leases a car for $435 a month and would like to buy a new car. The client has a lease on an apartment with his college friend. Their monthly rent on the apartment, which they split evenly, is $1,100. He has been working as a teacher for five years and earns $50,000 a year. His divorce was finalized last year. The housing counselor pulled the client's credit, and he has no debt except his car payment; however, he has filed for bankruptcy in the past. The client is worried, because his roommate did not pay a monthly utility bill earlier this year which is under the client's name. The client's total monthly expenses are $2,162, and he is current on all other bills. - CORRECT ANSWER-Net Income The scenario provides the gross income and total expenses, but the counselor needs the net income to prepare a realistic budget. The lease documentation, the credit score, and the bankruptcy discharge will not affect the budget.Reference: Module 1.1 BudgetPage Number 4 to 9 Which item in the client's budget is a fixed expense? - CORRECT ANSWER-Car lease payment A car lease will have a fixed monthly payment. Other expenses—like food, gasoline, and utilities such as electricity—can vary.Reference: Module 1.1 BudgetPage Range: 4 to 9 With a monthly mortgage payment of $950, which is the client's back-end ratio (round to the nearest whole percent)? - CORRECT ANSWER-33% The back-end ratio (or debt-to-income ratio) compares total debt to gross monthly income. The client's only debt is a $435 lease payment, so the $950 mortgage payment brings his total monthly debt to $1,385. He earns $50,000 per year, which equals $4,166.67 per month. The client's total current expenses divided by gross monthly income equals 52%. The client's combined current housing payment and car payment divided by gross monthly income equals 24%.Calculation:Debt: $435 + 950 = $1,385Income: $50,000 / 12 = $4,166.67Back-end ratio: $1,385 / $4,166.67 = 0.33 or 33%Reference: Module 2.1 Renting vs. BuyingPage Number 21 to 25 What is the maximum mortgage payment (rounded to the nearest dollar) for which this client would qualify using a standard conventional loan? - CORRECT ANSWER-$1065. The maximum front-end ratio for a standard conventional loan is 28%, and the back-end ratio is 36%. The front-end ratio is calculated as 28% of the client's monthly income of $4,167, which is $1,167. The back-end ratio is calculated as 36% of the client's monthly income of $4,167 minus the client's monthly debt of $435, which equals $1,065. Therefore, the maximum loan payment that the client qualifies for is the lower of the two numbers, which is $1,065. Reference: Module 2.1 Renting vs. Buying Page Number 11 to 24 The client is considering an FHA mortgage. What is the upfront mortgage insurance premium (UFMIP) for an FHA mortgage? - CORRECT ANSWER-1.75% Effective January 2015, the upfront mortgage insurance premium (UFMIP) is 1.75% for FHA mortgages. The annual MIP for FHA mortgages ranges between 0.8% and 1.05%. USDA loans charge an up-front Guarantee Fee of 2%. Reference: Module 2.2 Affordable Housing Options Page Number 13 to 13 The client tells the lender that he is expecting a raise soon. Which action should the lender take? - CORRECT ANSWER-Provide a loan estimate without factoring in the raise Encouraging the client to flip a loan could indicate that the lender wants to collect additional fees on a refinance.Lenders should offer loans based on a client's current ability to pay, not provide a higher loan amount based on a raise that has yet to materialize. Requiring a client to decide quickly can indicate predatory lending.Reference: Module 1.4 Protecting AssetsPage Number 4 to 6 If the client was denied a mortgage loan and the lender told him to come back after his divorce had been final for three years, what is the best advice for the housing counselor to provide to the client? - CORRECT ANSWER-Contact the Federal Trade Commission as the lender's action might violate the Equal Credit Opportunity Act This lender is violating the Equal Credit Opportunity Act (ECOA), which states: Federal law requires 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. This client's marital status of 'single' or 'divorced' should have no effect on the approval of the mortgage loan. The housing counselor should advise the client to contact the Federal Trade Commission, as that is the appropriate regulatory body for ECOA violations.Reference: Module 4.1 Pre-PurchasePage Number 28 to 28 The client is interested in lowering his utility costs. If the client seeks an FHA Energy Efficiency Mortgage (EEM) loan, what is the maximum housing payment for which he can qualify (round to the nearest dollar)? - CORRECT ANSWER-$1,375 To calculate the maximum housing payment, multiply the appropriate front-end ratio by the gross monthly income. The front-end ratio for an FHA EEM loan can stretch to 33%, and the gross income is $50,000 divided by 12, or $4,167 per month.Calculation: 0.33 multiplied by $4,167 equals $1,375.