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VA Loan Approval After Bankruptcy or Foreclosure

In recent years, an economic downturn and slow national recovery have made bankruptcy and foreclosure relatively common experiences among the American public. These are difficult monetary situations, and although a stigma remains, they are hardly a financial catastrophe. Contrary to common belief, you can receive full loan approval regardless of foreclosure or bankruptcy.In some cases (Chapter 13), an eligible recipient may in fact receive a loan even while in bankruptcy.

The Department of Veteran Affairs has established the following rules for loan approval.

https://www.vahomeloancenters.org/short-sale-military-mortgage-may-help-struggling-homeowners/VA Loan approval with Chapter 7 bankruptcy:

– The borrower must have no late payments since the bankruptcy filing.
– The borrower must have no derogatory credit (new collections) since the bankruptcy.
– The borrower must have a minimum median credit score of 530-640 (the variance is based on geographic location).
– A minimum of 2 years must pass from the date of discharge.
*NOTE – in some extenuating circumstances the borrower may apply and be approved after the first year of discharge.

VA Loan approval with Chapter 13 bankruptcy:

– A minimum of 12 months must pass from the date of bankruptcy initiation.
– The borrower must maintain a satisfactory performance of the bankruptcy repayment plan.
– The borrower must have no late payments after the date of the 341 (meeting of creditors and Trustee).
– The Trustee or court must approve the acquisition of new debt if the borrower is still in bankruptcy.
– The borrower must have no derogatory credit (new collections) from the date of formal bankruptcy.
– The borrower must have a minimum credit score of 530-640 (the variance is based on geographic location and lender guidelines).

VA Loan approval with Foreclosure:

– A minimum of 24 months must pass from the date of closing or Trustees sale.
– The borrower must have no late payments after the date of property transfer.
– The borrower must have no derogatory credit (new collections) from the date of foreclosure.
– The borrower must have a minimum credit score of 530-640 (the variance is based on geographic location).

VA Loan Approval After a Short Sale or Short Pay Off:

– If the short payoff or short sale was not a defaulted mortgage and the payments were current at the time of sale, a borrower may apply for a VA loan immediately.

If the borrower defaulted, a minimum of 24 months must pass from the date of escrow closing, recordation of deed to new owner, or since last derogatory was reported to the credit bureaus.

– The borrower must have no late payments after the date of sale (closing).
– The borrower must have no derogatory credit (new collections) from the date of sale (closing).
– The borrower must have a middle credit score of 530-640 (the variance is based on geographic location and lender guidelines).
– The borrower must not be delinquent on any other consumer debt and current on all payments.

To apply for assistance selling your home without equity, complete the form on this page. For information about short sale guidelines, click here.

IMPORTANT NOTICE:

If you choose to have VA Home Loan Centers represent you in selling your home as a short sale, you can stop using our services at any time. VA Home Loan Centers charges no up-front fees to assist you with your short sale. Our partner real estate brokerages will charge a real estate commission but if the bank agrees to a short sale, this is paid for by your lender. VA Home Loan Centers is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change the terms of your mortgage including approving your short sale. It is recommended that you continue to make payments on your mortgage throughout the process. Should you default on your payments, you can see a negative impact to your credit report and your home could be foreclosed upon.

Apply For a VA Loan

To apply for a VA mortgage, click here or call 888-573-4496 option 0.

These guidelines are the basis for loan approval. Each loan investor may have their own loan program overlay that may differentiate from the data herein. To learn about all VA loan program rules and to see which VA home loan is right for you, call the VA Home Loan Centers help desk at 888-573-4496.