Housing Counselor Certification (HUD) Practice Exam

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What is the highest monthly mortgage a client can afford if they work 40 hours a week making $15 an hour?

$500
$728
$900
$1,000

The correct answer is: $728

To determine the highest monthly mortgage a client can afford based on their income, it’s essential to first calculate their gross monthly income. A client making $15 per hour and working 40 hours a week would have their earnings calculated as follows: 1. Calculate weekly earnings: $15/hour * 40 hours/week = $600/week. 2. Convert weekly earnings to monthly earnings: Since there are approximately 4.33 weeks in a month: $600/week * 4.33 weeks/month ≈ $2,598/month. Now, when assessing how much of this income can be allocated toward a mortgage, a common guideline is that no more than 28% to 30% of gross monthly income should be spent on housing costs (which include mortgage principal, interest, property taxes, and insurance). Using the 28% guideline: $2,598 * 0.28 ≈ $727.44. This amount suggests that the highest affordable monthly mortgage payment for this individual is approximately $728. It is important to use gross income in these calculations because lenders assess ability to pay based on this figure before deductions like taxes or insurance are taken into account. This aligns with the understanding that a responsible borrower should not