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Posted On: 02/23/2011

QUESTION:

Once a homeowner stops making payments how long does it take before the property is foreclosed?

ANSWER:

There are a number of variables that impact foreclosure time lines. For example: Must a lender go to court to foreclose? Does the state have a mandatory period which delays foreclosure, such as a 90-day halt? Does the state also require a mediation period? Will the borrower enter the government's Making Home Affordable program? Has the homeowner declared bankruptcy?

The answer in many cases is more than a year - but sometimes far faster. Be certain. Given so many variables homeowners should contact an attorney or legal clinic as soon as a single payment has been missed.

QUESTION:

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What credit score do I need to obtain an FHA mortgage?

ANSWER:

A loan with FHA insurance allows you to finance a property with little down. Under FHA rules, a credit score of 580 and above will let you buy a property with one to four units with 3.5 percent down. You can get an FHA loan with a score between 500 and 579, but you'll need 10 percent down. Closing costs are extra. You must occupy one of the units as a prime residence.

However, many lenders now "layer" FHA requirements with additional standards. A study of 50 lenders by the National Community Reinvestment Coalition alleges that "44 did not lend at a 580 credit score. Thirty-two lenders, or 65 percent, refused to lend to consumers with credit scores below 620. An additional 11 lenders, or 22 percent, refused to extend credit to consumers with credit scores below 640. One lender refused to lend to consumers with credit scores below 600."

The NCRC objects to layering on the grounds that "FHA policy establishes a 100-percent guarantee" for borrowers who meet FHA norms, thus potential lender losses are not reduced with higher credit score requirements. It alleges that such policies have a "disparate impact" on minority households. Because of NCRC allegations, HUD has now launched an investigation into layering practices.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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