Getting a VA loan after bankruptcy is not as difficult as many think. While most loan programs require anywhere from a 3 year (FHA) to 4 year (Conventional) to even 7 year (some Jumbo programs) wait period after a bankruptcy, the VA program only requires a 2 year wait after the discharge of a bankruptcy.
VA Loan After Chapter 7 Bankruptcy
Depending on the type of bankruptcy, the wait period could even be shorter. For a Chapter 7 bankruptcy, which is total discharge of debts, 24 months must pass from the date of discharge to the loan approval. And while some VA lenders will have “overlays”, or their own guidelines which may be tougher than standard VA guidelines, an eligible Orange County Veteran who knows how flexible VA can be will have a better shot at buying a home sooner rather than later by working with a lender with minimal VA guideline overlays.
Another important thing to know is that many VA lenders will allow a two year wait for loans under $417,000. But for VA loans over $417,000 they will require a longer wait. For Veterans in Orange County, where home prices are high and where the 100% financing limit in 2016 is $625,500, working with an Orange County, CA VA lender who will allow only a 2 year will be the difference between buying a home and not buying a home in 2016. This means it is possible to purchase a condo, within a VA approved condo project in Orange County, only two years after a discharged bankruptcy.
VA Loan Immediately After Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is a restructuring of debt. In most cases the debts are not “discharged”, but are instead paid off over a specified time period. For example, if a Veteran has $25,000 in credit card debt, the court may create a payoff plan over a 3 or 5 year time period. It is actually possible to get a VA loan before the Chapter 13 is even discharged. If a perfect 24 month payment history in the Chapter 13 is proven then the Veteran can get VA financing. It is even possible to use a VA cashout refinance to pay off a Chapter 13. For someone looking to buy a home, there is no wait period after the discharge of the bankruptcy if they were in the Chapter 13 for at least two years and had a perfect payment history. (If you are in chapter 13, do not miss a payment.)
VA Loan After Foreclosure
The VA guideline for getting a loan after a foreclosure mirror their bankruptcy rules. Only a 2 year wait period is required. Even for loans oner $417,000. This is important to know because a very common overlay for VA lenders to is require between 4 and 7 years wait after foreclosure on for loans over $417,000.
Jumbo VA Loans and Bankruptcy
Understanding what a Jumbo VA loan is and how it enables a Veteran to finance a high priced home even after bankruptcy or foreclosure can be beneficial for a Veteran who may have had a rough financial stretch a few years ago. While most Jumbo loan programs are very restrictive when it comes to prior bankruptcies and foreclosures, the VA Jumbo program follows the standard VA guidelines of only a 2 year wait. Again, not all lenders follow the standard guideline, so knowing the guidelines and finding a local Orange County VA lender who follows the guidelines is important.
Technically VA does not have an official guideline for a minimum FICO score. Most lender will not go below 620 for loans under $417,000 and 640 for loans over $417,000. However, there are lenders who will go down to a 580 FICO score.
Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.