Alex Carlucci The Mortgage Expert,
Publish On: July 21, 2022
In this blog, we will discuss and cover qualifying for a VA loan with prior mortgage included in bankruptcy. VA home loans are the best mortgage loan program in the United States. Only active servicemen and women, retired veterans, reservists, spouses of deceased veterans, and National Guard members of our military with a valid Certificate of Eligibility (COE) are eligible for this unique loan program. The creation and implementation of VA Home Loans was a thankful gesture by our government for the appreciation of our veterans. VA Agency Guidelines are much more lenient than other home mortgage programs. In the following paragraphs, we will go over every aspect of qualifying for a VA loan with prior mortgage included in bankruptcy.
What Role Does The Veterans Administration on VA Loans
The Department of Veterans Affairs is not a lender. Veterans Affairs does not originate nor fund home loans. Private lenders originate VA Loans. The role of the VA is to partially insure and guarantee VA mortgages funded by lenders in the event homeowners default and foreclose on their homes. In order for Veterans Affairs to insure defaulted loans, lenders need to adhere to VA Mortgage Guidelines. For any homeowners who do not meet VA Guidelines, VA will not insure and guarantee them against the loss due to borrower default. Due to this government guarantee, lenders are able to offer VA Loans with no money down, 100% financing, no mortgage insurance, and lower than conventional mortgage rates.
VA Loan Credit Requirements
The U.S. Department of Veterans Affairs has created and implemented very lax and lenient credit guidelines to make veterans easier to qualify for VA Loans. VA realize that veterans may have less than perfect credit than their civilian counterparts due to deployment There are mandatory wait periods to qualify for VA Loans after a housing event and Bankruptcy. VA loans have the most lenient agency mortgage guidelines compared to other government loan programs. The Veterans Administration made homeownership possible for eligible veterans by creating lenient mortgage guidelines with no down payment required.
How Long After Bankruptcy and Foreclosure Can I Get a VA Loan?
The Veterans Administration has the most lenient mortgage guidelines after bankruptcy and foreclosure. There is a two-year waiting period after bankruptcy, foreclosure, a deed in lieu of foreclosure, and a short sale on VA loans. For FHA Loans, there is a three-year waiting period after the housing event and a two-year waiting period after Chapter 7 Bankruptcy.
How Long After Chapter 13 Bankruptcy Can I Get a VA Loan?
Borrowers can qualify for VA and FHA Loans one year into their Chapter 13 Bankruptcy Repayment Plan with Trustee Approval. Both VA and FHA Loans do not have any waiting period after the Chapter 13 Bankruptcy discharged date. Outstanding collections and charged-off accounts do not have to be paid to qualify for both VA and FHA Loans. Both VA and FHA Loans allow manual underwriting. There are no credit score requirements and no debt-to-income ratio caps on VA Mortgages. Most lenders have overlays on VA Loans.
What Are Underwriting Overlays on VA Loans?
What overlays are additional lending requirements above and beyond those required by the Department of Veterans Affairs? Most mortgage companies require a 620 to 640 credit score and have 43% to 50% debt to income ratio caps when the VA does not require that. VA does not have any minimum credit score requirement. VA does not have any debt-to-income ratio caps. Lenders require a certain credit score or DTI requirement due to them having their own internal overlays. Gustan Cho Associates Mortgage Group has no overlays on government and conventional loans. We will be discussing VA Loan With Prior Mortgage Included In Bankruptcy on this blog.
Waiting Period For VA Loan With Prior Mortgage Included In Bankruptcy
There are certain requirements with regards to the waiting period to qualify for VA Loan With Prior Mortgage Included In Bankruptcy. If a consumer had a mortgage or mortgages included in their Chapter 7 bankruptcy, there is a two-year wait period from the discharged date of Chapter 7 to qualify for VA Loans. The consumer cannot reaffirm the mortgage. The housing event (foreclosure, deed in lieu, short sale) does not need to be finalized.
There is no waiting period after the housing event if the mortgage was included in the bankruptcy. The two-year waiting period clock starts from the Chapter 7 discharge date. The foreclosure does not matter. Veterans who included a prior VA Loan in their Chapter 7 Bankruptcy need to make sure if they have enough Entitlement left to qualify for another VA Mortgage. If another type of mortgage was included in Chapter 7 Bankruptcy and the VA Entitlement was not affected, then veterans will have full entitlements.
How Do I Get Approval On A VA Loan With Prior Mortgage Included In Bankruptcy
Not all lenders have the same lending requirements on VA Home Loans. Just because a borrower was denied by a lender does not mean that they will not qualify with a different lender. Most lenders have overlays on government and conventional loans. VA does not require a minimum credit score requirement. VA does not have any debt-to-income ratio caps. However, most lenders will require a 620 to 640 credit score. Again, most lenders will have 43% to 50% debt to income ratio caps when the VA does not require it. Gustan Cho Mortgage Group has no overlays on government and conventional loans. This means we do not have a credit score nor debt to income ratio requirements. To start the pre-approval process, contact Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, on evenings, weekends, and holidays.
