You’ve been on active duty in service of your country. Whether you are still in active service or you have retired to become a civilian once again, you are still entitled to various benefits offered through the military, including a VA loan. A VA loan gives you the opportunity to secure a mortgage through various lenders, but the loan itself is insured by the United States Department of Veteran Affairs. There are qualifications that must be met in order to get a VA loan. Service members need to put in a certain amount of time in the service and cannot be dishonorably discharged. If you have filed for a bankruptcy, you may be concerned that it is not possible to enjoy the benefits of a VA loan. However, you still may be eligible. Know the facts about VA loans after bankruptcy.
You Can Qualify for a VA Loan After Bankruptcy
While it is true that getting a mortgage, or any type of loan, can be challenging after you have filed for bankruptcy. It’s challenging but not impossible. If you are applying for a VA loan, you may be eligible sooner than you think. When you file for bankruptcy, it is not unusual for your credit score to drop between 130 – 240 points. Climbing out of that hole can be a challenge. Luckily, for VA your credit sore is less of a concern than your credit history after the bankruptcy and your bankruptcy seasoning. VA will allow scores to be as low as 500. That score requirement does not increase due to a bankruptcy filing. Lender overlays add higher score requirements. Not the VA. As a current or former military member applying for a VA loan, you may find that lenders will work with you more readily than if you were applying for other types of home loans, including FHA loans. Find an aggressive no overlay lender like USA mortgage.
Chapter 13 Bankruptcy and the Waiting Period You Can Expect
If you have filed a Chapter 13 bankruptcy, you have chosen the option referred to as a wage earner’s plan because you have a source of income and plan on paying back your debts. You may be paying back the full outstanding balance or you may set up a schedule to repay a portion of your debts. The typical waiting period to apply for a mortgage is at least one year after your Chapter 13 has been filed. In other words, your payment plan need not be completed. It just needs to be paid timely for 12 months. If you are trying to get a mortgage through a conventional lender, you could have to wait at least two years.
Chapter 7 Bankruptcy and the Waiting Period You Can Expect
If you have filed a Chapter 7 bankruptcy, your assets that were non-exempt were liquidated in order to repay your creditors. The waiting period is at least two years after Chapter 7 bankruptcy has been discharged as opposed to conventional lenders that generally make you wait at least four years
How Does Your Wait Period Compare When You Get a Loan through the VA?
If you are applying for a VA loan after bankruptcy, your wait tends to be shorter than Conventional loans and mirrors that of FHA loans. No surprise here. They’re both government loans. You may qualify for a VA mortgage only a year after filing your Chapter 13 bankruptcy or two years after your Chapter 7 bankruptcy has been discharged.
It is important to understand that you will need to work with your Chapter 13 trustee as part of the process. You will need approval as you consider taking on a considerable debt like a mortgage, especially if you are still making payments to your creditors. When seeking a loan from conventional lenders, you would need to have your debts discharged for two years after completing the terms of a Chapter 13 repayment plan. Repayment plans typically run three to five years. The VA loan could potentially be yours in a much shorter time if your trustee approves a year after you filed.
How Can You Make Getting a VA Loan Easier After Bankruptcy?
The main thing you need to remember is you have to have clean credit after you have filed for bankruptcy. Regardless of what lender you use, you need to show that the driving force of your bankruptcy filing is no longer an issue. You also have to have an adequate source of income and a good work history. If you have filed a Chapter 13 bankruptcy, you need to make all of your payments on time for at least a year after you file. The same holds true after filing for a Chapter 7 bankruptcy. New lenders need to see that you have the ability and willingness to repay your monthly obligations.
Don’t Give Up on Your Dreams of Home Ownership
Bankruptcy should not keep you from buying a home. Over 800,000 people a year file for bankruptcy. Bankruptcy has always been a great way for a borrower to get a fresh start. Work diligently at repaying your debts if you are in a Chapter 13 bankruptcy. If you have a Chapter 7 bankruptcy, consider it a clean slate and keep your finances on track. When you have made it through the mandatory waiting period, you can apply for a home loan.