VA Loan During Chapter 13 Bankruptcy Mortgage Guidelines
In this blog, we will discuss and cover qualifying for a VA loan during Chapter 13 Bankruptcy mortgage guidelines. Many of our clients at Gustan Cho Associates are told they do not qualify for a VA loan while in Chapter 13 Bankruptcy. Many homebuyers are told they can’t qualify for a VA loan while in Chapter 13 Bankruptcy. They can’t qualify for VA loans until two years after Chapter 13 Bankruptcy discharged date. This is absolutely not true. Homebuyers can qualify for a VA loan during Chapter 13 Bankruptcy. Chapter 13 Bankruptcy does not have to be discharged. In this article, we will discuss the following:
- Qualifying for a VA loan during Chapter 13 Bankruptcy.
- Chapter 13 Bankruptcy does not have to be discharged.
- Getting Trustee approval.
- VA agency guidelines versus lender overlays.
There is no waiting period requirement after Chapter 13 Bankruptcy discharged date. Gustan Cho Associates is a VA lender with no lender overlays.
Do Mortgage Lenders Have Different Requirements on VA Loans?
VA loans are the best home mortgage program in the nation. VA loans are only available to active and/or retired members of the U.S. Armed Services with a valid VA certificate of eligibility (COE), Lenders offer 100% financing with no down payment required at lower rates than conventional loans due to the government guarantee, There is no mandatory mortgage insurance on VA loans.
What Is The VA Funding Fee?
The VA Funding Fee is a one-time cost that can be rolled into the balance of the VA loan, The Veterans Administration has much lenient agency mortgage guidelines than other loan programs Veteran home buyers with a Certificate of Eligibility can qualify for VA Loan During Chapter 13, Bankruptcy one year into the Chapter 13 Repayment Plan. In order to qualify for VA Loan During Chapter 13 Bankruptcy, the borrower will need to have the approval of the Chapter 13 Bankruptcy Trustee which is normally not a problem.
Types of Bankruptcies and VA Loans
There are two types of Bankruptcies available to consumers:
- Chapter 7 Bankruptcy
- Chapter 13 Bankruptcy
A Chapter 7 Bankruptcy is where a consumer has little to no income and is drowning in debt. Most debts can be discharged under a Chapter 7 Bankruptcy. It takes 90 days to have the consumer discharged with a Chapter 7 Bankruptcy. There is a two-year waiting period to qualify for a VA Loan after the discharge date of a Chapter 7 Bankruptcy. A Veteran borrower can qualify for VA Loan one year into a Chapter 13 Bankruptcy repayment plan. The borrower needs to show proof of on-time payments to their creditors for the past 12 months. There is no waiting period to qualify for a VA Loan after a Chapter 13 Bankruptcy discharge date.
VA Loans While on Chapter 13 Bankruptcy Repayment Plan
Here are the general requirements for VA Qualifying For VA Loan During Chapter 13 Bankruptcy:
- The borrower needs a valid COE, Certificate of Eligibility.
- Veteran Borrower needs to have made timely payments with no 30-day late payments for the past 12 months to all creditors named in the Chapter 13 Bankruptcy.
- The borrower needs to get approval from their assigned Chapter 13 Bankruptcy Trustee.
- The borrower needs at least a 580 Credit Score to qualify with Gustan Cho Associates
- We do not have any lender overlays on VA loans.
Rental Verification Requirements on VA Manual Underwriting
Verification of Rent is only valid if the renter can provide 12 months of canceled checks paid to their landlord. Or bank statements reflecting outgoing transfers of the same amount of their rental payments to their landlord’s bank account. If the renter rents from a registered property management company, then a VOR Form is provided by the lender to the property manager. Can be completed by the property management manager and can be used in lieu of the 12 monthly checks and/or 12 months of bank statements. Gustan Cho Associates can waive the verification of rent for borrowers who have been living rent-free with family in order to save money for their home purchase and closing costs.
VA Loan Requirements For 2022
VA Loans is the best mortgage loan program available to mortgage borrowers. However, not everyone qualifies for VA loans.
Here are the qualification requirements for VA Loans and a little about VA Loans:
- VA Loans are only for Veterans who have served in the U.S. Military with a Certificate of Eligibility.
- VA Loans do not require the borrower to put any money down on a home purchase.
- The team at Gustan Cho Associates are experts in originating and funding VA Loans With Bad Credit and VA Loans With Low Credit Scores with no VA Lender Overlays.
Mortgage Insurance Premium on VA Loans
One of the greatest benefits of VA loans is there is no mortgage insurance premium on VA loans.
- There is a one-time VA Funding Fee
- The VA funding fee can be rolled into the loan balance of the VA loan.
- The mortgage insurance premium is not required on VA loans.
- One-time VA upfront funding fee is reduced for veterans with a disability.
- There is no maximum loan limit on VA loans.
VA Credit Score Requirements on VA Loans
VA does not have a credit score requirement. It is up to individual lenders to have lender overlays on credit scores. We recommend a minimum of 580 Credit Score on VA Loans in order for the best chances of getting an approve/eligible per Automated Underwriting System. However, Gustan Cho Associates have closed VA loans with credit scores in the low 500 FICO with an approve/eligible per AUS.
Mortgage Rates Versus Credit Scores Pricing on VA Loans
Gustan Cho Associates has no VA Lender Overlays. VA Loans has very low mortgage rates for borrowers with higher credit scores. Mortgage rates on high credit score borrowers are lower than conventional rates. VA Lenders can offer the lowest mortgage rates on VA Loans even with 100% financing. The reason why VA loans are lower for higher credit score borrowers is that the VA Loan is guaranteed by the United States Department of Veteran Affairs.
VA Waiting Period After Chapter 13 Bankruptcy Discharge Date
Here are the requirements to qualify for VA Loan During Chapter 13 Bankruptcy Repayment Period And After Chapter 13 Bankruptcy Discharge Date:
- A Veteran borrower with a COE can qualify for a VA loan during Chapter 13 Bankruptcy.
- Need to be one year into the Chapter 13 Bankruptcy repayment plan with the approval of the Chapter 13 Bankruptcy trustee and verification of rent.
- Timely payments in the past 12 months.
- We recommend a minimum 580 Credit Score and have no overlays on VA loans.
We do not have any debt-to-income ratio requirement on VA loans. Just go off Automated Underwriting System approval. As long as the Veteran borrower has plenty of VA Residual Income, we can get an approve/eligible per AUS FINDINGS with debt to income ratios as high as 60% DTI.
Understanding Overlays versus VA Agency Guidelines on VA Loans
The reason why some lenders disqualify Veteran borrowers for VA loans during a Chapter 13 Bankruptcy repayment period is NOT BECAUSE OF VA GUIDELINES, BUT because of their own lender overlays on VA loans. Lender Overlays are the individual lender’s own lending requirements on top of the VA Guidelines. There is no waiting period to qualify for a VA Loan after a Chapter 13 Bankruptcy discharge date. Each mortgage lender can have higher lending standards than those of the U.S Department of Veteran Affairs and this is what you call lender overlays.
VA Debt to Income Ratio Mortgage Guidelines
VA loans do not have a maximum debt-to-income ratio cap on VA loans. As long as the borrower has strong residual income and has timely payments in the past 12 months, the borrower should be able to get an approve/eligible per AUS. One of the frequently asked questions at Gustan Cho Associates is why is it many lenders with the name Veterans attached to their name require a 620 credit score or higher. Lenders with the name Veterans as part of their name have absolutely no affiliation to the Veterans Administration. VA has no minimum credit score requriements. Gustan Cho Associates has countless borrowers with credit scores down to 500 FICO and debt-to-income ratio higher than 60% DTI. Most lenders have mortgage overlays on debt-to-income ratio on VA loans. Gustan Cho Associates has zero lender overlays on VA loans.
VA Chapter 13 Bankruptcy Guidelines
Using VA Loans During Chapter 13 Bankruptcy to purchase a home without bankruptcy discharge. VA and FHA loans are the only two home mortgage programs for homebuyers during the Chapter 13 Bankruptcy repayment plan. There are two types of consumer bankruptcy. Chapter 7 and Chapter 13 Bankruptcy. Chapter 7 Bankruptcy is the bankruptcy of choice. This is because it is easy, fast, cheap, and only takes 90 days to get the bankruptcy discharged from the filing date. However, there are parameters that come along with Chapter 7 Bankruptcy. The consumer needs to meet the Chapter 7 Bankruptcy Means Test. What this means is there are income caps determining whether or not you qualify for Chapter 7 Bankruptcy. You can only have a certain amount of assets. Any assets over the exempt amount need to be liquidated and payments go to creditors. Borrowers can qualify for an FHA and/or VA loan two years after the discharge date of Chapter 7 Bankruptcy.
Chapter 7 Versus Chapter 13 Mortgage Guidelines On VA Loans
Chapter 7 Bankruptcy best benefits consumers without jobs and/or assets. Chapter 7 Bankruptcy is a great tool for consumers to restart their financial life debt-free. Chapter 13 Bankruptcy is a debt restructuring program administered by the courts. The bankruptcy trustee will allocate a certain percentage of the consumer’s income. That certain percentage will be set aside and used to pay creditors.
How Long Is Chapter 13 Bankruptcy Repayment Plan
Most Chapter 13 Bankruptcy repayment plans are for 60 months. Creditors get paid a discounted amount every month for 60 months. After 60 months, the unpaid balance is then discharged by the courts and the consumer is now debt-free. Mortgage borrowers can qualify for an FHA and/or VA loan during Chapter 13 Bankruptcy repayment plan after being in the plan for 12 months.
When Can I Qualify For VA Loans After Filing Chapter 13 Bankruptcy?
12 months of timely payments need to be paid to the trustee. The loan needs to be manually underwritten. Manual underwriting guidelines apply. Borrowers cannot have any late payments. Need proof of 12 timely payments. Chapter 13 Bankruptcy does not have to be discharged. Gustan Cho Associates are experts in helping homebuyers qualify for an FHA and VA loan during Chapter 13 Bankruptcy. There is no waiting period after the Chapter 13 Bankruptcy discharge date. However, any Chapter 13 Bankruptcy that is not seasoned two years after the discharged date needs to be manually underwritten. In the following paragraphs, we will discuss and cover Using VA Loans During Chapter 13 Bankruptcy to purchase a home.
Using VA Loans During Chapter 13 Bankruptcy Versus After Discharged Date
The Department of Veterans Affairs (VA) is the federal agency that administers VA loans. The VA is not a lender. The VA has nothing to do with the origination and funding of VA loans. Private lenders offer 100% financing with no mortgage insurance at competitive mortgage rates on VA loans due to the government guarantee. In the event borrowers default and/or foreclose on VA loans, the VA will insure and partially guarantee the losses sustained by the lender.
Is VA Loans Easier To Qualify Than Other Mortgage Loan Programs?
The VA has created very lenient agency mortgage guidelines on VA loans. VA and FHA loans are the only two home mortgage programs that permit borrowers in an active Chapter 13 Bankruptcy repayment plan to qualify for a mortgage. There is not much difference in using VA loans during Chapter 13 Bankruptcy versus after the final discharge of the bankruptcy.
Bankruptcy Trustee Approval For A Mortgage During Chapter 13 Bankruptcy Repayment Plan
The main difference with the mortgage process during Chapter 13 Bankruptcy is the borrower needs Trustee approval and needs to be a manual underwrite. The team at GCA Mortgage are experts in helping borrowers qualify for a mortgage during a Chapter 13 Bankruptcy repayment plan. To this date, we had never had a trustee deny a home mortgage to purchase a new home during the Chapter 13 repayment plan.
VA Loan During Chapter 13 Bankruptcy Trustee Approval
There is absolutely no need to stress about the trustee not signing off on your new home purchase request during the Chapter 13 Bankruptcy repayment plan. There is no waiting period after the Chapter 13 Bankruptcy discharge date. However, any Chapter 13 Bankruptcy discharge that has not been seasoned for two years needs to be manually underwritten. VA and FHA loans are the only two home mortgage programs that allow for manual underwriting. Manual underwriting guidelines apply.
VA Agency Guidelines Versus Lender Overlays
Do all lenders have the same lending guidelines on VA home mortgages? ABSOLUTELY NOT. All lenders need to meet the minimum lending guidelines by the Department of Veterans Affairs. Lenders can have their own lending requirements that are above and higher than the minimum lending guidelines of the VA which are called lender overlays. Gustan Cho Associates is one of the very few national mortgage companies with no lender overlays on VA loans. For example, the VA does not have a minimum credit score requirement on VA loans as long as the borrower can get an approve/eligible per the automated underwriting system.
Lender Overlays on Credit Scores on VA Loans
Most lenders will have a minimum credit score requirement of 620 to 680 FICO. This holds true even though the VA does not have a minimum credit score requirement. The Veterans Administration has no maximum debt-to-income ratio caps on VA loans. However, most lenders will impose overlays on debt to income ratios at 45% to 50% DTI. Again, GCA Mortgage Group has no lender overlays on DTI on VA loans. We are one of the very few national mortgage companies with no lender overlays on VA loans.
Qualifying For A VA Home Mortgage With A Lender With No Lender Overlays
Borrowers who have been turned down for a VA loan during Chapter 13 Bankruptcy repayment plan or are being told they do not qualify after bankruptcy discharged date until one or two years later, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Over 75% of our borrowers at GCA Mortgage Group are folks who could not qualify at other lenders due to their lender overlays and/or get a last-minute mortgage denial. Gustan Cho Associates is a five-star national mortgage company licensed in multiple states with no lender overlays on VA loans.
Best Mortgage Lenders For VA Loans During and After Chapter 13 Bankruptcy
Not all mortgage lenders can do VA loans while on Chapter 13 Bankruptcy repayment and after Chapter 13 Bankruptcy discharge. Again, most lenders will have mortgage overlays on VA loans. GCA Mortgage Group has a national five-star reputation for its no-lender overlays on government and conventional loans. As long as you meet the minimum VA Agency Lending Guidelines, Gustan Cho Associates will qualify you, and approve and close your VA loans. To qualify, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The Team at GCA Mortgage Group is available 7 days a week, on evenings, weekends, and holidays.