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HUD 2022 Practice Exam Questions and Complete Solutions Graded A+
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HUD 2022 Practice Exam Questions and Complete Solutions Graded A+
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HUD 2022 PracticeExam Questions
and Complete
Solutions Graded
A+
Denning [Date] [Course title]
,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. - 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? - 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)? - 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%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? - 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? - 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? -
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? -
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)? - 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.Reference: Module 2.1 Renting vs. BuyingPage Number 22 to 22
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? - 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. Reference: Module 2.1 Renting vs. Buying Page
Number 6 to 10
The client is considering renting an apartment with a different landlord. Which would be an upfront cost
of moving to the new apartment? - 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 assistance programs to determine if he is eligible. Eligibility requirements for downpayment
assistance programs usually include which factors? - Answer: Income, homebuyer education and/or
counseling, purchase price
Eligibility varies depending on the program but is typically based on income, pre-purchase education
and/or counseling, and the price of the property being purchased. Employment status is not considered,
because homebuyers can have income and not be employed. Age of the homebuyer is not considered
because it is not a DPA requirement and it could violate the Equal Credit Opportunity Act. Family size is
not a criterion in and of itself, as it is included in the income calculation.Reference: Module 2.2
Affordable Housing OptionsPage Number 16 to 19
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