How Soon Can You Qualify for a VA Loan after a Chapter 7 or Chapter 13 Bankruptcy in Florida, Texas, Tennessee, or Alabama?
The answer for our topic today may surprise you! Today’s video tip will cover the details on how qualifying for a VA loan after a Chapter 7 or Chapter 13 Bankruptcy can be possible and discuss when possible exceptions may apply.
However, if you have a qualifying question or a transaction that is experiencing trouble, remember that I started Metroplex way back in 2001, so let our experience be a resource for you and take advantage of our Free Second Opinion Service (“SOS”) which can be a great way to help keep your mortgage approval headed in the right direction!
How soon can you qualify for a VA loan after a Chapter 7 or 13 Bankruptcy in Florida, Texas, Tennessee, or Alabama?
As a reminder, these are the basic differences between bankruptcies which impact VA qualifying differently:
- Chapter 7 Bankruptcy: you ask the bankruptcy court to discharge most of the debt you owe
- Chapter 13 Bankruptcy: you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time.
(This does not cover all differences but just a frame of reference. Read a detailed description about each bankruptcy.)
So, does the type of bankruptcy filed affect VA loan qualifying? The answer is YES, it most definitely does.
How soon can you qualify for a VA loan after a Chapter 7 Bankruptcy?
- Chapter 7 Bankruptcies discharged more than two years ago from the date of closing for purchases and refinance, it may be disregarded.
- If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:
- The applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period; and
- The bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse.
Please note that additional factors can contribute towards granting an exception to the 2 year policy, but any and all factors considered would have to be reviewed on a case by case scenario prior to approval. Borrowers discharged for less than a year will not generally be accepted as a satisfactory credit risk.
How soon can you qualify for a VA loan after a Chapter 13 Bankruptcy?
A. For Chapter 13 Bankruptcies that are still in progress:
- The applicant must document at least one year into the payout plan has elapsed along with satisfactory payment history
- The applicant must obtain court permission to enter into the new mortgage
- When the bankruptcy is still in repayment, the Chapter 13 payment will be counted in the debt ratios
B. Once the borrower has satisfactorily completed the repayment, the borrower is considered to have re-established credit
As you can see, the type of bankruptcy can drastically impact VA loan eligibility and the required waiting period.
Today’s topic was just another tip on how to maximize the VA loan program and help our eligible service members into homeownership.
Remember to just call or email to discuss your scenario and let us show you the “Metroplex” difference!
800-806-9836 Ext. 280
At Metroplex Mortgage Services we thank you all of our brave men and women fighting for our freedoms each and every day!