Bankruptcy is a difficult and stressful situation to go through. But all hope is not lost. You can still buy a house after bankruptcy.
To get a VA loan after bankruptcy, you must complete the waiting period. The waiting period is subject to the type of bankruptcy filed. Usually, it’s around 2 years. Use this time to rebuild your credit score.
- VA Loan After Bankruptcy: Active and retired military members can apply for a VA loan even after bankruptcy.
- Waiting Period: The waiting period depends on the type of bankruptcy filed. It is usually around 2 years.
- Eligibility: Eligibilty depends on a few factors. The type of bankruptcy filed, reason for bankruptcy, and your ability to meet the VA eligibilty standards.
Can I Apply For a VA Loan Post Bankruptcy?
Veterans can qualify for a VA loan even after they file for bankruptcy. It’s easier to apply for a VA loan than a conventional or FHA loan.
Retired and active military personnel can qualify for a VA loan based on three factors
- Type of bankruptcy filing: There are two main types of bankruptcy for individuals – Chapter 7 and Chapter 13. Each has its own terms and conditions to follow before you can apply for a VA loan.
- Reason to file bankruptcy: Loss of income, high medical bills, unaffordable mortgage – there are several reasons to file for bankruptcy. You may have to prove that the bankruptcy was beyond your control.
- Ability to meet VA eligibility requirements based on COE: Certificate of Eligibility issued by the Department of Veterans Affairs shows the lender that you can make timely payments. You must acquire the COE before you can apply for a VA loan post-bankruptcy.
What is the VA Certificate Of Eligibility?
A VA Certificate of Eligibility (COE) is a document that proves your eligibility for a VA home loan. It is issued by the Department of Veterans Affairs (VA) and contains information such as your name, service information, and entitlement amount.
Entitlement refers to the maximum amount that the VA will guarantee for your home loan.
How Long After Bankruptcy Can I Get a VA Loan?
If you’ve gone through bankruptcy, you may wonder how long you’ll need to wait before you can get a VA loan. The waiting period depends on the type of bankruptcy you filed and the VA loan you apply for.
You can file for a Chapter 7 or Chapter 13 bankruptcy depending on your situation.
Let’s break it down
VA Loan After Chapter 7
Chapter 7 bankruptcy is a type of bankruptcy that allows individuals to eliminate most of their unsecured debts. These may include credit card debt and medical bills.
Chapter 7 bankruptcy can significantly impact your credit score and ability to obtain credit in the future.
To apply for a VA loan after Chapter 7 bankruptcy discharge you must
- Complete the waiting period of 2 years
- Make timely payments on your debt
- Rebuild your credit score to a minimum of 580 – 640
VA Loan After Chapter 13
Chapter 13 bankruptcy is a type of bankruptcy that allows individuals to repay their debts over three to five years.
Chapter 13 bankruptcy or ‘reorganization’ bankruptcy usually involves a repayment plan to pay off debts without selling property.
To apply for a VA loan after Chapter 13 discharge you must
- Complete at least 12 months of payment (of your repayment plan)
- Rebuild your credit score to a minimum of 580 – 640
VA Loan After Foreclosure
Foreclosure may not be a type of bankruptcy but usually co-occurs (with Chapter 7 bankruptcy). You can still qualify for a VA loan even with a foreclosure in your credit history. Usually, Veterans must go through a seasoning period of 2 years before they can qualify for a VA loan post-foreclosure.
Here is what you can do
- Document your personal circumstances in a letter of explanation
- Seek the lender’s advice before the mortgage application process
📌 Important: You can’t use the full entitlement on a new mortgage if your foreclosure involved a previous VA loan.
How to Increase the Chance of Approval During Your Bankruptcy Waiting Period?
- Rebuild Your Credit: Bankruptcy can have a significant impact on your credit score. There are steps you can take to rebuild your credit. Make sure you’re paying all your bills on time. Keep your credit card balances low. Consider getting a secured credit card to start rebuilding your credit.
- Save For a Down Payment: A down payment can help improve your eligibility for a VA mortgage after bankruptcy. Saving up for a down payment shows lenders that you’re responsible with your finances and may make you a more attractive borrower.
- Work With a Credit Counselor: A credit counselor can help you develop a plan to improve your credit score and manage your finances after bankruptcy. They can also help you understand your credit report and dispute any errors.
- Wait For The Waiting Period to End: The waiting period for a VA loan after bankruptcy depends on the type of bankruptcy you filed. It is usually around 2 years in most cases. Take this time to work on your credit score.
- Speak With a Lender: Speak with a lender specializing in VA loans to help you understand your options and navigate the application process. They can also help you identify any additional steps you can take to increase your eligibility.
All is not lost after bankruptcy. You can still apply and qualify for a VA loan and buy the home you deserve. Start rebuilding your credit score and understand VA guidelines on bankruptcy before applying for a VA loan.
All the best and thank you for your service!
Frequently Asked Questions
1. How long is the VA bankruptcy waiting period?
You must wait for a minimum of 2 years before you can apply for a VA loan post-bankruptcy. The waiting period and terms of application depend on the type of bankruptcy filed.
2. What are the VA bankruptcy guidelines?
The VA has guidelines that allow individuals to be eligible for a VA loan after bankruptcy. Typically the waiting period is of two years following a Chapter 7 bankruptcy discharge and one year following a Chapter 13 bankruptcy discharge.
3. Can I get VA loan 1 year after chapter 7?
After filing for Chapter 7 bankruptcy, individuals can become eligible for a VA loan one year later if they meet certain requirements. These include re-establishing a satisfactory credit history, demonstrating financial responsibility, and obtaining approval from a VA lender.
4. How long does it take to recover from bankruptcy?
Recovering from bankruptcy typically takes around 7 to 10 years as it requires the removal of the bankruptcy from the credit report and the individual rebuilding their credit.
5. Can You Get a VA loan with bad credit?
Yes, you can get a VA Loan with a bad credit score. You need to fulfill some minimum requirements to qualify.
- Cost to Build a House: Check out our blog on how much it costs to build a house.
- Mortgage Brokers: Here is a list of mortgage brokers near you.
- Closing Costs for Buyers: Find out the closing costs for buyers in the U.S.
- How to Buy a House: Here is a guide to help first-time buyers purchase a home.
- Buyer Closing Cost Calculator: Closing costs can sometimes be confusing, this calculator will help to find an accurate rate of closing costs for buyers.
Related: va loan and bankruptcyUncategorized