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Chris Salese

It’s that time of the year again, when the unofficial start of summer is marked by Memorial Day weekend barbecue celebrations and the amazing BottleRock music festival.

Since this column is not a guide to all of the fantastic restaurants and happenings here in town, I need stay focused on the topic at hand, which is the 580 FICO score home loan program.

Per the FHA’s website, “the Federal Housing Administration (FHA) has been helping people become homeowners since 1934 by insuring loans so your lender can offer you a better deal.”

Let’s look at that sentence again.

First off, that’s a long time of continued support for our housing industry, and we should be incredibly thankful for it.

Secondly, anytime there’s insurance involved through the government, there’s usually some layer of risk involved for everyone.

Lastly, the FHA is referring to getting a “better deal” via lower down payment options, reduced closing costs and, of course, easier credit qualifying.

That being said, the FHA’s 580 FICO score home loan program isn’t new. But it’s common for it to pop up in a lender’s marketing kit when there’s a need for buyer stimulation at various price points in certain geographic areas.

This loan program is also an effective tool to assist those borrowers with strong incomes and recovering credit profiles. For example, if you were looking at a home listed for sale at about $660,000 in Napa County, you can smartly use this product if you had a 580 FICO score and still only need 5 percent or less of the purchase price for the down-payment.

However, you should be aware of a few details. Most likely, if your FICO score is between 580 and 599, it’s in that range as a result of something derogatory in your credit profile.

Therefore, you’ll have to navigate around a couple of credit hurdles to qualify for this program.

You must have proof of a timely 12-month mortgage or rental history either on your credit report or with cancelled checks to reflect no 30-day late payments in the previous 12 months.

You can’t have any bankruptcies in the most recent two years plus short sales, accounts “settled for less than amount owed” or foreclosures in the most recent three years.

In addition, you can’t have any public records, judgments or tax liens over $1,000 recorded in last 12 months and all must be paid at or prior to closing, too.

You are not allowed to have any collections opened in the last 12 months other than medical and only one collection under $1,000.

Finally, you must not be currently delinquent on any revolving or installment debt and you’ll need at least 2 months in reserve payments.

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Chris Salese can be reached at or (707) 363-4439. He is a licensed California mortgage banker (NMLS 254469 /1850 CA BRE 01377933/01215943) and equal housing lender.