Many Veterans believe that if they file for a Bankruptcy they will not be able to utilize their VA Home Loan benefits. Having worked with Military Veterans for the past 15 years I hear this comment quite often. When I respond to the Veteran and explain what I am about to explain to you I hear the same thing every time, a sigh of relief!
Fortunately the VA has the most liberal rules and guidelines than any other loan program for home buyers when it comes to this subject. The VA only requires two years from the date of discharge on a Chapter 7 Bankruptcy; this is the Bankruptcy that clears a person of all debt. When it comes to a Chapter 13 Bankruptcy, where you pay a monthly payment to a Trustee, the VA only requires 12 months of payments to the Trustee to qualify for a VA loan. The monthly payment to the Trustee must be considered as part of the monthly debt as well. Keep in mind, sometimes the VA will allow the use of VA Home Loan benefits sooner than the time frames I just mentioned. It goes on a case by case basis and it must be proven that the Bankruptcy was for reasons beyond your control.
One hidden fact that many people do not know about is the VA will allow approval for the use of a VA Loan if a house was foreclosed on and included in the Bankruptcy. If the loan was a VA loan then the VA needs to be contacted to see if there was an outstanding balance on the loan that the VA needed to pay. If it was not a VA loan then it should be pretty simple to get an approval.
One thing the VA will require after a Bankruptcy is reestablished credit. This can be done with a secured credit card, where you deposit a certain of money and the usage and monthly payments are reported to the credit bureaus. A trusted friend could put you as an authorized user on a credit card and even purchasing an inexpensive car with monthly payments will help establish credit.
One thing to remember is the VA has a zero tolerance policy for thirty day late payments on credit after a Bankruptcy. If it is an isolated thirty day late a good explanation will usually be sufficient but if there are more than one it is usually a decline. The VA will require two years of good credit with no 30 day late paymentssince the date of the last 30 day late noted on a credit report.
These quick articles may also help in your search for information.
Paying off debt to get a VA Loan
How do I get a copy of my DD214
What question to ask if you are declined a VA Home Loan
Whatever you do, do not let a Bankruptcy derail your hopes and dreams from owning a home. Take the steps to reestablish your credit, make good on your financial obligations each month and before you know it you will be a home owner!
Victor Runkle
Real Estate Managing Broker
Cell: (360) 904-2164
Email: victor@cascadehomesales.com
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