FHA Loan & FHA Refinance FAQs

Answers to some of the most commonly asked questions regarding FHA mortgages and FHA refinance loans.

What Is An FHA Loan?

An FHA loan is a federally guaranteed, or insured, mortgage loan. FHA loans are issued by private lenders or mortgage providers, not the federal government. Lenders must be approved by the Federal Housing Administration (FHA) in order to provide FHA loans and mortgages. The mortgages may be fixed or adjustable rate mortgages. For a complete listing of the types of FHA loans including FHA refinance options available from Capital Bank, N.A., click here.

What Are The Advantages Of A FHA Loan?

FHA loans are often easier for people with less than perfect credit, little to no down payment or low to moderate incomes to qualify for. Due to the FHA qualification process, borrowers are less likely to get into a mortgage they can’t afford. Lenders assume less risk by providing FHA backed mortgages because the mortgage is insured against default by the federal government. This insurance also allows lenders to offer better interest rates to FHA-qualified buyers than they are likely to receive through a conventional mortgage loan.

To find out if a FHA loan is right for you, contact a mortgage specialist at Capital Bank, N.A..

Who Is Eligible For FHA Loans?

FHA loans are open to anyone who meets the qualifications. There are no income limitations, which makes FHA loans particularly popular with young couples and families, low to moderate income households and those with less than perfect credit.

Why Do I Need Mortgage Insurance?

FHA mortgage insurance protects the lender in case the borrower defaults on the loan. It is because of mortgage insurance that many borrowers are able to qualify for an FHA mortgage and enjoy reduced upfront costs.

Why Do I Need An Appraisal?

FHA guidelines require an independent appraisal conducted by a FHA-approved appraiser to assess the condition of the property, assure that is actually for sale, and determine its market value. Appraisals protect the buyer, the lender and the FHA from purchasing a property that is unsafe or substandard.

What Are The FHA Lending Limits?

FHA lending limits are caps on the amount you can get on an FHA mortgage loan. These limits are based on area home prices and vary by state and, sometimes, by county. For detailed information about the lending limits in your area, speak with your local Capital Bank, N.A. representative.

What Kind Of Documentation Do I Need To Get An FHA Loan?

Your Capital Bank, N.A. representative will provide you with a list of required documents in order to apply for an FHA loan. These documents will provide insight into your employment, credit and payment histories and include such things as past W2’s, most recent addresses, recent employers, your gross monthly income and income tax forms.

Can I Get A FHA Loan Even If I Have Bad Credit?

The FHA exists to help borrowers with less than perfect credit achieve the dream of homeownership. However, there are minimum qualifications that must be met to receive loan approval. Your debt-to-income ratio and credit history play a strong role in the application process, but poor credit may not automatically disqualify you from receiving a loan. The mortgage lenders at Capital Bank, N.A. take many other factors into account when examining your creditworthiness and can provide insights and advice on how to improve your credit score.

What Can I Do To Improve My Credit Rating?

Make sure you have at least one year of responsible payment history behind you before applying for a FHA loan. Two years is even better. To improve your credit rating, make payments on time and pay at least the minimum amount required. Figure out your debt to income ratio and try to keep it under 30%. Most importantly – Don’t make a major credit purchase before getting your home loan! This will cloud your credit history and skew your debt to income calculation. Get rid of any debt you can, without damaging your financial situation in the process. Pay down credit cards and auto loans if possible.

What Does It Mean To Be Prequalified?

Prequalification is a way for lenders to verify your ability to pay a mortgage without having to go through the full FHA mortgage application process. Prequalification provides a snapshot of your financial situation and gives you and the lender an idea of what amount of mortgage you can afford. Being prequalified can be an advantage when it comes time to make an offer since prequalified buyers are generally more attractive to sellers than those who are not prequalified.

How Do I Prequalify For An FHA Loan?

Lenders will want to examine your employment history, credit rating and determine your monthly debt to income ratio in order to prequalify you for a loan. You will provide them with the necessary documents and they’ll arrive at a prequalification amount. Capital Bank, N.A. can help you get prequalified in a matter of minutes – contact us at (866) 216-3577 or info@valoansfinance.com to start the prequalification process!

What Fees Should I Be Aware Of With An FHA Mortgage?

There are several fees that arise in any mortgage transaction. They vary depending on the type of FHA loan you are seeking but can include: appraisal fees, inspection fees, credit report fees, document preparation fees and other charges. The mortgage professionals at Capital Bank, N.A. can provide you with a list of fees associated with your type of FHA loan upfront so you are fully aware of what you need to pay, to whom and when.

How Does Being A Veteran Or Active Duty Member Of The Military Affect My FHA Application?

Veterans need to submit the DD Form 214 along with their FHA loan application papers. Active duty military personnel can qualify for an interest rate reduction. Military personnel and veterans may also be eligible for a VA Loan. To learn more about VA Loans and find out if you qualify, please contact Capital Bank, N.A. at (866) 216-3577 or info@valoansfinance.com.

Should I Refinance My Current Loan To An FHA Loan?

The FHA processes thousands of refinance requests every year. If you meet the FHA guidelines and the resulting monthly mortgage payment will be less than your current payment, you can refinance with an FHA mortgage. FHA refinancing is open to those with current FHA loans as well as those with conventional loans. Those with current FHA loans can qualify for an FHA Streamline Refinance. Refinancing can be used to take equity out of your home, reduce your monthly payments and/or interest rate or change the term of your mortgage loan.

For answers to all your FHA mortgage loan questions or talk about your unique situation, contact Capital Bank, N.A. at (866) 216-3577 or info@valoansfinance.com.