In today’s turbulent economic atmosphere, financial hard times can hit any of us. If you are hoping to get a VA home loan but you have recently been through bankruptcy, you may be wondering what kind of restrictions you will face. The good news is that it is possible to get a VA loan after bankruptcy, but you might have to wait to make it happen.
Post-Bankruptcy Restrictions
As a military veteran or active-duty service member, whether or not and how soon you can qualify for a VA loan will depend on several factors including the type of bankruptcy you filed, the reasons for your bankruptcy, and your ability to meet the standards VA eligibility requirements. In some cases, it may actually be easier to get a VA loan after bankruptcy than other types of mortgages.
Chapter 7 Bankruptcy
A Chapter 7 Bankruptcy requires a trustee to sell nonexempt property, like cars and real estate, to pay off debts. Some assets may be exempt. Afterward, remaining debts are discharged, giving the debtor a clean slate.
However, this bankruptcy stays on your credit report for up to 10 years. It may take up to two years after filing to qualify for a VA loan. To qualify, borrowers need a credit score between 580-640 and no late payments or new collections since the bankruptcy.
Chapter 13 Bankruptcy
Chapter 13, or “reorganization bankruptcy,” sets up a repayment plan to help debtors keep certain assets. The repayment period lasts 3-5 years, after which remaining debts are discharged.
Your credit score drops the same regardless of bankruptcy type, but Chapter 13 may help you apply for a VA loan sooner. It stays on your report for 7 years.
You can apply for a VA loan after 12 months if your loan is court-approved. You’ll need a credit score of 580-640, timely payments, and no new collections or late payments.
Making Your Post-Bankruptcy VA Application More Attractive
You can use the mandatory waiting periods after bankruptcies to improve your chances of being approved by rebuilding your credit. The most important thing you can do is to make timely payment for all your debts. It is also crucial to bring down any other outstanding debt obligations, including student loans, car loans, and credit card accounts. This will improve your debt-to-income ratio. Try to refrain from opening any new lines of credit during your waiting period as well.
Get a VA Home Loan
While you may have to wait up to two years after a bankruptcy, it is absolutely possible to still qualify for a VA loan. Contact us today to find out the specific rules and qualifications.
Give us a call today and we’ll talk through all of your options.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
