In this blog, we will cover and discuss VA Chapter 13 Bankruptcy Buy Out with cash-out refinance. VA Chapter 13 Bankruptcy buy out can be done through doing a cash-out refinance on VA home loans while on Chapter 13 Bankruptcy repayment plan. The coronavirus pandemic outbreak in February 2020 caused many Americans financial distress. The global pandemic has hit the economy of the United States hard. Not only are was the liberal media and left-wing politicians created panic but more importantly, politicians and the liberal media politicized the COVID-19 outbreak. Dozens of states were ordered to be shut down. The team at Gustan Cho Associates are experts in helping homeowners with VA Chapter 13 Bankruptcy Buy Out with cash-out refinance while on Chapter 13 repayment plan.
How The COVID-19 Scare Tactic Devastated Millions
A large percentage of hard-working American small business owners and employees of small businesses have suffered enormous losses when they were forced to file for bankruptcy. The coronavirus outbreak literally created an economic, social, and political meltdown. One of the hardest-hit industries was the mortgage industry. Many employees of mortgage companies were forced to be remote.
How Coronavirus Outbreak Forced Small Business Owners To Close
Many brick-and-mortar lenders got rid of their brick-and-mortar locations and went virtual with Zoom and other technology. It changed the entire mortgage industry. Most Non-QM lenders literally went out of business. There were two non-QM lenders that suspended operations until further notice. Major mortgage guideline changes are expected to be made on non-QM loans when it opens up. Some of the changes will be higher credit scores, larger down payments, and lower debt-to-income ratio caps. The coronavirus pandemic has hit government and conventional loans hard.
How The Filing of Bankruptcy Soared Due To COVID-19 Shutdowns By State Government
Many small businesses like restaurants were ordered to close by local, county, and state governments for months at a time. Millions of Americans have filed for bankruptcy due to the government shutdowns and extended coronavirus state shut down orders by governors. There are two types of bankruptcies: Chapter 7 and Chapter 13 Bankruptcy.
How Long Does Chapter 7 Bankruptcy Take For Discharge?
Chapter 7 Bankruptcy takes 90 days after the filing date to get a discharge. Chapter 13 Bankruptcy is a debt restructuring plan which normally takes five years before the balance of the debts can be discharged. Homeowners with equity in their homes who are in a Chapter 13 Bankruptcy repayment plan can do a VA Chapter 13 Bankruptcy Buy Out with a cash-out refinance on VA loans and get the bankruptcy dismissed earlier than the scheduled discharged date.
Can I Qualify For a VA Loan After Chapter 7 Bankruptcy?
Homebuyers can qualify for a VA loan after Chapter 7 Bankruptcy after meeting a two-year waiting period requirement from the discharge date of Chapter 7. You need to have been timely on all of your monthly debt payments after the Chapter 7 Bankruptcy discharged date with no late payments. Borrowers should start rebuilding and re-establishing their credit the minute they are discharged from the Chapter 7 Bankruptcy.
How Can I Do VA Chapter 13 Bankruptcy Buy Out To End Chapter 13 Early?
Mortgage borrowers can qualify for only two loan programs while in Chapter 13 Bankruptcy: FHA and VA loans. Chapter 13 Bankruptcy is a court approved debt restructuring and repayment plan. The term of the repayment is three to five years with a five year repayment plan being more popular. Consumers who are in debts with not having the income to pay the debt satisfactorily every month can file for Chapter 13 Bankruptcy protection.
How Soon Can You Apply For a VA Loan After Filing For Chapter 13?
Mortgage borrowers can qualify for an FHA and/or VA loan while in Chapter 13 Bankruptcy repayment plan. Homebuyers and homeowners can qualify for a VA loan after 12 months of filing Chapter 13 Bankruptcy and having made 12 satisfactory timely monthly payments to the Bankruptcy Trustee. Homebuyers can apply for a home purchase loan on VA loans. Homeowners with equity can do a VA Chapter 13 Bankruptcy Buyout buy doing a cash-out refinance with a VA loan.
How Difficult Is It To Get Bankruptcy Trustee Approval For a Mortgage?
Bankruptcy trustees will almost always approve a home purchase and/or refinance mortgage while in Chapter 13 repayment plan. Many people are afraid they will have a hard time getting bankruptcy trustee approval. That is not true. Unless you are buying a mansion or luxury second home, most trustees see a home as a necessity and will almost always approve a home mortgage. The bankruptcy will always sign off on a VA Chapter 13 Bankruptcy buy out cash-out refinance mortgage loan as well so you can end your Chapter 13 early.
Will Trustee Sign Off On VA Chapter 13 Bankruptcy Buy Out?
The bankruptcy trustee will need to sign off on the mortgage, whether it is a home purchase, refinance, or a VA Chapter 13 Bankruptcy Buy Out with a cash-out refinance. A common question we get often by people who filed Chapter 13 during the coronavirus economic turmoil with state shutdowns is how soon can you apply for credit after filing Chapter 13? Mortgage borrowers can qualify for a home purchase and/or refinance mortgage loan while in Chapter 13 repayment plan after 12 months from the filing date and have made 12 months of timely payments.
How Does The Chapter 13 Repayment Process Work?
The bankruptcy courts, through an assigned Chapter 13 Bankruptcy Trustee, will restructure the overall debts of the petitioners based on their income. A portion of the borrowers income is allocated to pay the list of creditors of the petitioner. The debts are paid at a reduced amount based on the petitioner’s income. After the repayment term is over, the Bankruptcy Trustee will recommend the U.S. Bankruptcy Courts to discharge the Chapter 13 Bankruptcy. The remaining balance of the debts is then discharged when the Chapter 13 Bankruptcy is discharged.
Can Chapter 13 Be Discharged Early?
Five years is a very long time to be under the jurisdiction of the U.S Bankruptcy Courts. While you are on Chapter 13 repayment plan, your financial freedom is very limited. You need to get permission from the bankruptcy trustee for any major purchase, need permission to buy a car, get a mortgage, and even getting a few secured credit cards. One of the frequently asked questions from our clients is can Chapter 13 be discharged early? The answer is YES.
VA Chapter 13 Bankruptcy Buy Out Ends Chapter 13 Early
Homeowners wtih substantial equity in their homes can do a VA Chapter 13 Bankruptcy buy out by doing a VA cash-out refinance mortgage. VA loans allow up to a 100% loan-to-value on VA cash-out mortgage loans. With the proceeds, the homeowner can do a VA Chapter 13 Bankruptcy Buy Out and get the Chapter 13 Bankruptcy discharged sooner than later.
Rebuilding Credit During After Bankruptcy To Qualify For a VA Loan
Consumers should rebuild and re-establish their credit during Chapter 13 Bankruptcy repayment plan. The best and easiest method of rebuilding your credit during Chapter 13 Bankruptcy to qualify for a mortgage is buy getting a few secured credit cards. Secured credit cards is the easiest and fastest tool to increase your credit scores and rebuild your credit. In just two to three months after applying for secured credit cards, you will see a 20 to 50 point boost in credit scores for each secured credit cards. The ideal credit card limit is $500 and the ideal number of secured credit cards you should get is three to five.
Using Secured Credit Cards To Rebuild Credit During and After Bankruptcy To Qualify For a Mortgage
The team at Gustan Cho Associates has helped thousands of clients get their credit scores to over 700 FICO within 12 months from their discharge date. Most of our borrowers at Gustan Cho Associates work with us on credit fixes and rebuild the minute they get discharged from Chapter 7. There is no cost for us to help our future homebuyers after Bankruptcy. Most of our borrowers who work with us after their Chapter 7 discharge have credit scores close to 700 or higher than 700 within two years of the discharge date of their Chapter 7. In the next paragraph, we will cover and discuss qualifying for an FHA loan during and after Chapter 13 Bankruptcy.
How Does Chapter 13 Bankruptcy Affects Getting a VA Loan?
There are two types of bankruptcies: Chapter 7 and Chapter 13 Bankruptcy. We have discussed qualifying for a VA loan after Chapter 7 Bankruptcy in the previous paragraph. Chapter 13 Bankruptcy is normally a five year repayment plan. The bankruptcy trustee will restructure the debts of the petitioner and a portion of the face value of the debt is spread out over five years.
How Does Chapter 13 Bankruptcy Get Discharged?
After five years, the remaining balance of the debts is discharged. Chapter 13 Bankruptcy discharge means the consumer is no longer liable for the debts and has a fresh financial start in life. Chapter 13 Bankruptcy does not affect getting approved for VA loans. Borrowers can qualify for a VA loan after making 12 monthly on time payments to the bankruptcy court from the Chapter 13 Bankruptcy filing date.
What Credit Score is Required For VA Chapter 13 Bankruptcy Buy Out Cash-Out Refinance
For example, there are no minimum credit score requirements on VA loans. Most lenders always had lender overlays on VA loans even though the VA does not require a minimum credit score requirement. Gustan Cho Associates never had lender overlays on VA mortgages. Most lenders required a 580 to 620 credit score requirement on VA loans prior to the coronavirus pandemic. However, the coronavirus economic mortgage meltdown has lenders think twice about their credit score requirements
The Best Mortgage Lenders For VA Chapter 13 Bankruptcy Buy Out With No Overlays
Over 95% of the lenders have changed their VA lending guidelines by imposing strict lender overlays. Most lenders now require a 640 credit score or higher. Any VA loans under 680 FICO will most likely be charged discount points. Gustan Cho Associates Mortgage Group is one of the very few mortgage lenders that will approve VA loans for borrowers with under 620 credit scores. In this article, we will discuss and cover VA Loans Under 620 FICO During Coronavirus Pandemic Crisis.
Mortgage Rates on VA Loans Under 620 FICO
The coronavirus pandemic has shaken up the mortgage market. Mortgage rates hit a historic low. However, lenders are increasing mortgage rates for borrowers with lower credit scores. Most lenders who had either no overlays or limited lender overlays have completely changed their credit score requirements. The majority of lenders have placed lender overlays on credit scores of 640 or higher. VA loans for borrowers under 680 FICO have skyrocketed.
Mortgage Rates on VA Chapter 13 Bankruptcy Buy Out Cash-Out Refinance
Any borrower with a 680 credit score or lower can expect mortgage rates as high as 5.0% and expect to pay discount points. Is getting approved for VA Loans Under 620 FICO During Coronavirus Pandemic Crisis possible? YES, Gustan Cho Associates Mortgage Group still has investors who will approve VA Loans Under 620 FICO During Coronavirus Pandemic Crisis. For example, we just locked a loan for a VA manual underwriting borrower with a 530 FICO today at a rate of 4.75% paying 2 discount points. How long will the mortgage crisis due to the coronavirus pandemic last? As of today, there is no cure and/or vaccine for the coronavirus vaccine. In the meantime, the economic crisis is devastating to the mortgage markets.
Why Lenders Stopped Originating VA Loans Under 620 FICO
President Donald Trump signed the $2 trillion stimulus bill passed by the Senate and House of Representatives into law last week. Included in the bill was a law that gives unemployed homeowners the option to suspend their mortgage payments for up to 12 months. This is called a mortgage forbearance. So any homeowner who has been unemployed can contact their mortgage servicer and request a forbearance for up to 12 months. This will not negatively affect the borrower’s credit scores. However, the mortgage servicer still needs to pay interest and principal payments to the investor.
Best Mortgage Lenders For VA Manual Underwriting
On top of that, the servicer needs to pay property taxes and homeowners insurance for borrowers who have escrows. The stimulus package did not include any relief for nonbank mortgage servicers. Banks such as JP Morgan Chase, Bank of America, Wells Fargo, and other FDIC banks are not seriously affected because they can borrow the principal and interest payments to investors from the Fed. Nonbank servicers cannot borrow from the Federal Reserve Board.
What Are Discount Points For VA Loans With Low Credit Scores?
The mortgage secondary market had halted buying mortgages with lower credit scores. This is the main reason why lenders have completely restructured their credit mortgage guidelines, which are called lender overlays. Many lenders who did not have any overlays or had limited overlays all raised their minimum credit score requirements to at least a 640 FICO. Others went a step further and increased their credit scores to 660 to 680 FICO.
How To Apply For VA Chapter 13 Bankruptcy Buy Out Refinance?
The coronavirus pandemic mortgage crisis mainly affects mortgage borrowers with lower credit scores. Borrowers with higher credit scores can get low mortgage rates on government and conventional loans. The Fed started buying mortgage-backed securities (MBS) which will help stabilize the mortgage market. However, many borrowers have lower credit scores and/or bad credit. Borrowers who need to qualify for a government and/or conventional loan with lower credit scores, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
This blog on VA Chapter 13 Bankruptcy Buy Out With Cash-Out Refinance Was Updated on June 23rd, 2022.
June 23, 2022 - 9 min read