VA Chapter 13 Manual Guidelines During Bankruptcy Repayment Period
This Article Is About VA Chapter 13 Manual Guidelines During Bankruptcy Repayment Period
VA Loans are home loan programs for active and/or retired members of the United States Armed Services with a Certificate of Eligibility. The Certificate of Eligibility is also referred to as the COE. The Department of Veterans Affairs offers VA Loans to eligible members of the U.S. Military as a reward and token of appreciation for their sacrifice and service. VA Loans offers countless benefits including being able to purchase a home with no down payment and 100% down payment. The VA created lenient credit/income mortgage guidelines for veterans. The reason, studies prove that members of the U.S. Armed Services have lower credit/income profiles than their civilian counterparts.
The Department of Veterans Administration does not originate nor fund VA Loans. Private lenders originate and fund VA Loans. The VA will partially insure lenders against loss in the event borrowers default and foreclose on their VA Loans. Due to this government guarantee, mortgage lenders can offer 100% financing at very low mortgage rates.
VA Agency Guidelines Versus Lender Overlays
Most lenders have Lender Overlays on VA Loans. There are two types of VA Mortgage Guidelines:
- VA Agency Guidelines
- VA Lender Overlays By Lenders
All lenders need to make sure their borrowers meet the minimum VA Agency Guidelines set forth by the United States of Veterans Affairs (The VA). Lenders can have additional tougher lending requirements on VA Loans which are called lender overlays. A lender can have any type of overlays. For example, the VA does not have a minimum credit score requirement or a maximum debt to income ratio cap. Most lenders have a minimum credit score requirement of 620 to 640 FICO which are overlays on credit scores. The VA does not have any debt to income ratio cap requirement. Most lenders will cap debt to income ratios on VA Loans between 41% to 50% as part of their overlays.
Gustan Cho Associates is one of the very few mortgage companies with no lender overlays on VA Loans. We just go off the automated underwriting system (AUS) findings and have no additional overlays.
VA Eligibility Guidelines And Minimum Mortgage Requirements
Here are the minimum VA Lending Guidelines:
- 100% financing with no down payment required
- The allows up to 4% in sellers concessions for borrowers to cover closing costs
- No minimum credit score is required with an automated underwriting system (The AUS) findings
- No maximum debt to income ratio cap with AUS Approval
- There is a two-year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Loans
- Outstanding collections and charge off accounts do not have to be paid to qualify for VA Home Loans
VA loans allow manual underwriting.
VA Manual Underwriting Guidelines
FHA and VA Loans are the only two loan programs that allow manual underwriting. Manual Underwriting is when the automated underwriting system cannot render an approve/eligible per AUS and renders a refer/eligible. Refer/Eligible per AUS means that the automated underwriting system cannot render an automated approval. However, the AUS triggers the borrower is eligible but needs the file manually underwritten by a human mortgage underwriter.
Here are the VA Manual Underwriting Guidelines:
- Need to be timely with all payments for the past 12 months
- Verification of rent
- If the borrower cannot provide rental verification, the borrower needs to sign a living for the rent-free letter which is provided by the lender
- The maximum debt to income ratio is 31/43 with no compensating factors
- The debt to income ratio is 37/47 with one compensating factors
- The maximum debt to income ratio is 40/50 with two compensating factors
VA Chapter 13 Manual Guidelines During Repayment Plan Without Discharge
Borrowers can qualify for VA Loans during Chapter 13 Bankruptcy Repayment Plan with Trustee Approval and manual underwriting after making 12 timely payments to the Trustee. 12 timely payments need to have been made. Chapter 13 Bankruptcy does not need to be discharged. There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for VA Loans. However, if the discharge has not been seasoned for two years, then the file needs to be manually underwritten.
For more information on this blog or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected]