Can I get a VA loan after bankruptcy? Many people may have this question in mind.
Life can get tough sometimes, resulting in the least expected outcome. bankruptcy isn’t an uncommon event, resulting in a negative impact on your financial profile and affecting your eligibility for obtaining a loan. However, this doesn’t have to stop you from using the VA benefits. Can you get a VA loan with bankruptcy? Bankruptcy can make the process more complex, but it isn’t impossible to obtain a loan.
In this post, we share all you need to know about getting a VA loan after bankruptcy. Once you go through it, you will learn how to fix your financial history and qualify for a loan.
VA loan after bankruptcy
Can I get a VA loan after bankruptcy? Active military personnel and veterans are qualified for getting a VA loan after bankruptcy. There are different kinds of bankruptcies, meaning that they will have a different effect on the outcome.
In general, homebuyers that have experienced bankruptcy can wait two years for Chapter 7 and one year for Chapter 13 to be eligible.
Chapter 7 bankruptcy VA loan
Chapter 7 bankruptcy is a liquidation bankruptcy, meaning that you sell the property to pay for the debt. If you filed for bankruptcy more than two years ago, this wouldn’t impact your qualification for a loan. However, you need to make sure you meet the other requirements to be eligible for a VA loan.
However, you are still eligible for a loan if the bankruptcy was issued more than one but less than two years ago. However, you need to fulfill the particular requirements to be eligible for a loan. This means that you need to show that the event happened due to factors out of your control. Also, you need to have a credit history after bankruptcy.
Chapter 13 bankruptcy VA loan
Chapter 13 bankruptcy means that the consumer agreed to make an arranged payment plan to cover the missed payments, so there is no liquidation involved. To complete this, you need to focus on paying off the debt and have a steady income. The new payment plan also referred to as reorganization, can extend from three to five years.
Can I get a VA loan after bankruptcy that involves reorganization? If you completed payments despite the default, you could still be eligible for obtaining a VA loan. If you paid accordingly in the last 12 months, the lender would oversee the bankruptcy. However, you will be required to fulfill the other standard requirements for getting a VA loan, such as a stable income.
Potential home buyers should keep in mind that a bankruptcy will have a negative impact on their credit score. Expect to see a drop ranging from 130 to 240 FICO points, which will impact your creditworthiness.
In some cases, an individual might experience a foreclosure after a bankruptcy. In such situations, lenders have different policies. However, you can do your best to improve your credit score to secure a VA loan after bankruptcy.