In response to a blog post about VA loan seasoning periods, a reader asks, “So how do we know if we will have to wait two or three years?”
This question references a minimum two-year seasoning period before a borrower can apply for a new VA home loan after a bankruptcy filing, short sale, or foreclosure. This two year wait is only negotiable in cases of Chapter 13 bankruptcies.
We cover the difference between Chapter 7 and Chapter 13 in a different blog post, but VA loan rules basically state that a borrower could be allowed to apply for a new VA mortgage loan after specific conditions. From the original blog post:
“VA loan rules give lenders the option to consider a borrower still paying on a Chapter 13 Bankruptcy for a new VA home loan under certain conditions…Payments to the court must have been made on time and to the court’s satisfaction for at least one year. In such cases, the court trustee must provide written approval to proceed. Borrowers should know there’s an additional requirement–full explanation of the bankruptcy. The borrower must have re-established good credit, qualify financially and meet other conditions as set by VA rules and the lender.”
Back to the reader’s question. How does the VA borrower know whether he or she is required to wait two or three years before applying for a new VA home loan after a bankruptcy, foreclosure, or short sale?
The VA rules state two years is the minimum, but the lender is free to require a longer wait. The answer to the reader question is basically that it all depends on the lender. There’s no one written rule stating how long you may be required to wait beyond the two-year mark.
It’s important to point out that in cases of foreclosure or short sales, if the borrower has any indebtedness to the government as a result of a compromise claim or other action where the Department of Veterans Affairs has taken a loss on the original VA mortgage, that debt must be addressed to the government’s satisfaction before a new VA loan can be applied for.
It’s also good to know that the required seasoning period applies regardless of whether the home loan was conventional, FHA, or VA guaranteed. Simply put, borrowers should not expect to go into a new home loan soon after a bankruptcy, short sale, or foreclosure.