VA Chapter 13 Mortgage Guidelines On VA Home Loans
This ARTICLE Is About VA Chapter 13 Mortgage Guidelines On VA Home Loans
VA and FHA loans are the only mortgage loan programs that allow borrowers to qualify for a home purchase and/or refinance mortgage during the Chapter 13 Bankruptcy repayment plan. No other loan program will allow borrowers in an active Chapter 13 Bankruptcy repayment plan to qualify for a home loan. Bankruptcy Trustee approval is required. Trustees will normally sign off on a home purchase and/or a refinance during the Chapter 13 Bankruptcy repayment plan. Many homeowners with substantial equity in their homes can do a VA and/or FHA cash-out refinance during the Chapter 13 Bankruptcy repayment plan and pay off the Chapter 13 early. With home values skyrocketing, homeowners are sitting with a lot of equity in their homes.
Under VA Chapter 13 Mortgage Guidelines, borrowers can qualify for VA Loans during Chapter 13 Repayment Plan without needing it to be discharged. There are no waiting period requirements after the Chapter 13 Bankruptcy discharged date. However, any Chapter 13 bankruptcy without a two-year seasoning after bankruptcy needs to be manually underwritten.
The automated underwriting system (AUS) will not render an approve/eligible per AUS on any Chapter 13 without a two-year seasoning after bankruptcy discharged date. Borrowers in an active Chapter 13 repayment plan and without a two-year discharged date seasoning will get a refer/eligible per AUS. Therefore, borrowers need to go through manual underwriting. In this article, we will cover and discuss VA Chapter 13 Mortgage Guidelines during and after the bankruptcy discharge. We will cover manual underwriting guidelines on VA Loans and the importance of compensating factors.
Manual Underwriting Versus Automated Underwriting System
Not all lenders do manual underwriting on VA Loans. Gustan Cho Associates is one of the very few national lenders that do a great deal of manual underwriting on VA and FHA Loans. VA and FHA Loans are the only two home loan programs that allow manual underwriting.
There are very few differences between manual versus automated underwriting systems. VA does not have a minimum credit score requirement nor a maximum debt to income ratio cap. With manual underwriting, debt-to-income ratios are normally capped at 60% DTI with compensating factors. AUS on VA Loans can go up to 70% DTI depending on residual income and/or compensating factors.
VA Chapter 13 Mortgage Guidelines During Repayment Plan
Per VA Chapter 13 Mortgage Guidelines, borrowers can qualify for both purchase and refinance mortgage loans during the Chapter 13 Bankruptcy repayment plan.
Here are the basic VA Chapter 13 Mortgage Guidelines:
- 100% financing with no down payment required
- No minimum credit score requirement
- No maximum debt to income ratio requirements
- No maximum loan limit on VA Loans
- Borrowers need to make at least 12 monthly on-time payments to the Bankruptcy Courts to be eligible for VA financing during Chapter 13
- Debt to income ratios depends on compensating factors and residual income
- Chapter 13 Bankruptcy does not need to be discharged
- Bankruptcy trustee approval is necessary
- All manual underwriting require verification of rent
- Low payment shock is considered a compensating factor
- Manual underwriting requires timely payments in the past 24 months
- One or two late payments in the past 24 months are not always deal killers as long as the borrower can document extenuation circumstances
Gustan Cho Associates is one of the most aggressive lenders of helping borrowers qualify for VA Loans during Chapter 13 Bankruptcy.
Qualifying For VA Mortgages After Chapter 13 Discharge Date
There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for VA Loans. However, if the bankruptcy is not discharged for two years, it needs to be manually underwritten. Most lenders with lender overlays may require a waiting period requirement after the Chapter 13 discharge date. Gustan Cho Associates are national lenders with no lender overlays on VA Loans. We have no waiting period requirement after the Chapter 13 Bankruptcy discharged date.
Late Payments During Chapter 13 Bankruptcy
Late payments during Chapter 13 Bankruptcy repayment plan frowns upon by lenders. However, late payments during Chapter 13 repayment are not always a deal killer. Gustan Cho Associates Mortgage Group has helped countless borrowers with late payments during the Chapter 13 repayment plan. The borrower needs a good excuse and/or reason for the late payment during the Chapter 13 Bankruptcy Repayment Plan. The loan officer can help borrowers with detailing the late payments during the repayment plan.
Late Payments After Bankruptcy And Housing Event
Mortgage lenders frown upon borrowers who have a late payment after a bankruptcy and/or foreclosure. Borrowers who have a late payment after bankruptcy discharge and/or foreclosure, short sale, deed in lieu of foreclosure are classified as a risky second offenders by mortgage lenders. Most lenders will not approve a mortgage to borrowers with late payments after bankruptcy and/or foreclosure no matter how high their credit scores are. However, one or two late payments after bankruptcy and/or foreclosure are not always a deal killer. Gustan Cho Associates have helped countless borrowers with late payments after bankruptcy and/or foreclosure.