VA Loans After Chapter 13 Bankruptcy

It’s possible to get a VA home loan after filing Chapter 13 bankruptcy.  However, the borrower needs to be in the Chapter 13 bankruptcy repayment plan for at least 12 months.

  • There is no waiting period following a Chapter 13 discharge. 
  • Applicants can qualify for a VA loan after making 12 timely payments to their plan if the bankruptcy trustee approves.
  • Those who fail to make their bankruptcy plan payments won’t qualify for VA financing.

Lenders want to see timely payments during the Chapter 13 bankruptcy repayment plan.  No late payments after Chapter 13 bankruptcy discharged date.

Prequalify for a VA home loan in about five minutes. 

VA Loans After Chapter 13 Bankruptcy

All lenders require borrowers to meet minimum VA guidelines mandated by the Department of Veterans Affairs. However, lenders can impose overlays, which are stricter requirements than the VA lays out.

For example, the VA does not have a minimum credit score requirement. However, a lender may require a 620 credit score. Others may require a longer waiting period after bankruptcy. Gustan Cho Associates has no lender overlays on VA loans.

VA Has No Maximum Debt to Income (DTI) Ratio

VA loans do not have a maximum debt to income ratio on debt to income ratio. This normally holds true even for applicants with a Chapter 13 bankruptcy. However, most lenders want to see VA loans with debt to income ratio no greater than 41%.

Gustan Cho Associates can approve with manual underwriting files with a debt to income ratio as high as 65% as long as you have sufficient residual income. Residual income is another way to qualify borrowers by seeing how much income is left after they pay their bills.

It makes sense because you could have a DTI of 60% if your income is $10,000 a month and you pay $6,000 for bills. That would disqualify you under most DTI guidelines. But that still leaves you $4,000 in residual income. Under residual income guidelines, you’re more likely to qualify.

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Credit Scores

The VA has no minimum credit score requirements. Even for loans after a Chapter 13 bankruptcy. However, you need a clean credit history for at least 12 months to re-establish credit if you have derogatory things like collections, bankruptcy, foreclosures etc. 

VA Agency Guidelines

What are the benefits of VA loans

Here are the basic VA agency guidelines. Gustan Cho Associates works within these guidelines with no overlays:

  • No minimum credit score requirements on 100% financing
  • No maximum debt to income ratios
  • Approval comes from an automated underwriting system (AUS)
  • You don’t have to pay outstanding collections and/or charged-off accounts
  • Two-year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu or short-sale
  • Residual income determined by AUS
  • Verification of rent required for manual underwriting
  • No waiting period after Chapter 13 Bankruptcy discharge
  • Qualify during Chapter 13 Bankruptcy after 12 timely payments with trustee approval

Manual underwriting is required for all VA Loans during the bankruptcy period and within two years of discharge.

Ask the Experts

Not all lenders will qualify borrowers for VA Loans after Chapter 13 bankruptcy. Most lenders have overlays and may require borrowers to wait one or two years to qualify. However, Gustan Cho Associates no overlays for VA Loans. Please contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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