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HUD CERTIFICATION 2024 ACTUAL EXAM QUESTIONS AND DETAILED ANSWERS WITH RATIONALES
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HUD CERTIFICATION 2024 ACTUAL EXAM QUESTIONS AND DETAILED ANSWERS WITH RATIONALES
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HUD CERTIFICATION 2024 ACTUALEXAM QUESTIONS AND DETAILED
ANSWERS WITH RATIONALES
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.
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.
,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, = $4,166.67Back-end ratio:
$1,385 / $4,166.67 = 0.33 or 33%
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%.
,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.
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.Multiplying the front-end ratio for a rental (30%) would
result in a payment of $1,250.Multiplying the traditional back-
end ratio for EEM loans (45%) would result in a payment of
$1,875 minus the debt of $435 equaling $1,440. Therefore, the
front-end ratio applies because it results in a lower payment.
The client is second-guessing his decision to buy a home, so
the counselor asks a series of questions. Which response
would best align with the homeownership option for this client?
Correct Answer Client wants to customize his home with do-it-
yourself projects.
Although some landlords might allow tenants to make
improvements to the home, the ability to perform home
improvement projects usually requires owning the home. Since
the client currently lives with a roommate, he is unlikely to lower
monthly housing costs by moving. The client could move closer
to his school and have a pet in a different apartment.
The client is considering renting an apartment with a different
landlord. Which would be an upfront cost of moving to the new
apartment? Correct Answer Application fee
Typically, renting involves a fee associated with an application.
A down payment is a direct cost for buying a home. Although a
small percentage of renters may engage an attorney to review
the lease, attorney's fees are typically included in closing costs
when buying a home. Maintenance is an ongoing cost,
although it more often is associated with buying a home than
renting one. Reference: Module 2.1 Renting vs. BuyingPage
Number 7 to 9
As part of their ongoing conversation about renting versus
buying, the counselor and client review down payment
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