FHA Loan Eligibility & Qualifications

Qualifying For An FHA Mortgage Loan Or FHA Refinance Loan

Although FHA loans and FHA refinance loans are open to everyone and have no income limitations, you still must qualify for the a loan by proving to the FHA and their approved lender that you are a low credit risk. Low credit risk applications are reliable and show employment and job stability.

At Capital Bank, N.A. we may be able to help you prequalify for an FHA mortgage or FHA refinance loan. We are experts in how the FHA loan process works and can help you get the required documentation in order so that you qualify for the best loan possible.

Understanding The FHA Loan Qualifications

To understand why the FHA requires the documentation that it does, you must first understand that the FHA wants to promote responsible homeownership by preventing buyers from getting into homes and mortgages that they cannot afford.

To do this, all FHA-approved lenders, including Capital Bank, N.A., will look at your past payment and credit histories to determine if your history indicates that you are likely to pay your mortgage.

A Thorough FHA Loan Prequalification Process Benefits Everyone

The mortgage lender and the FHA have extra assurance that the homebuyer can afford the mortgage loan payments and is, therefore, less likely to default on the loan. Meanwhile, the homebuyer has gone through a thorough examination of their finances and should have a better understanding of what FHA loan amount they can afford.

FHA Loan Qualifications

At Capital Bank, N.A., we use several methods to determine your credit health and your eligibility for an FHA loan or FHA refinance loan. These items are considered in combination with each other. A less-than-perfect credit score won’t necessarily disqualify you, but every situation is unique. Contact us at (866) 216-3577 or [email protected] today for a comprehensive credit evaluation.

Information that we use to determine credit worthiness include:

  • Debt-to-Income Ratio. As your FHA lender we will calculate your debt-to-income ratio when reviewing your loan application. The ratios are used to determine whether a borrower is financially capable of making their mortgage payments. This is done to help prevent buyers from taking on a mortgage that they cannot afford. There are two types of ratios used in the FHA mortgage program:
  1. 1) Mortgage Payment Expense to Effective Income. This ratio takes the total mortgage payment (principal, interest, escrow deposits for taxes, hazard insurance, mortgage insurance and homeowners’ dues, etc.) and divides that amount by the applicants’ gross monthly income. The maximum ratio allowed in order to qualify for an FHA loan is 31%.
  2. 2) Total Fixed Payment to Effective Income. This ratio examines your total mortgage payment plus all of your other recurring monthly payments on revolving and installment debt, such as auto, student or personal loans and credit cards. That amount is added together and divided by your gross monthly income. The maximum ratio allowed in order to qualify for an FHA mortgage is 43%.
    1. Credit Performance and Rating. One of the most important factors in your FHA loan application’s success or failure is your credit. You must have a decent credit score to qualify for an FHA purchase loan or FHA refinance, but it doesn’t have to be perfect. Good candidates for FHA mortgages make payments to their creditors on time and regularly and they don’t carry too much unsecured credit.

Items Of Concern That Can Negatively Affect FHA Mortgages

  • No Credit History
  • Chapter 13 Bankruptcy
  • Chapter 7 Bankruptcy
  • Late Payments
  • Foreclosure
  • Collections, Judgment and Federal Debts

Although the items on the list above can negatively affect your credit score, they may not disqualify you from getting FHA loans or FHA refinance loans. There are many variables that impact your creditworthiness. The mortgage specialists at Capital Bank, N.A. can examine these variables, evaluate your history and advise you of your FHA loan options.

If you have a unique situation or wonder if you meet the FHA loan qualifications, contact us at (866) 216-3577 or [email protected] With our simple online prequalification form, we can usually get an answer for you in a matter of minutes, and get you on the road to homeownership today!