Bankruptcy & VA Financing
Veterans can take advantage of a number of benefits programs, such as the mortgage loans guaranteed by the Veterans Administration (VA). With this type of program, you can get access to a mortgage loan even if you have a questionable credit history. Even if you have had a bankruptcy in the past, you could still qualify for a loan.
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VA Loan
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A VA mortgage loan is a type of loan that you can use to buy or refinance a house if you are in the active military or a veteran of the military. When you fit into one of these groups, you can get a mortgage loan that is guaranteed by the VA. The loan itself is not provided by the VA, but you get it from a traditional lender. The VA simply stands behind the loan and guarantees it in case it goes into default.
Credit Factors
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Since the VA stands behind each mortgage in this program, it is possible to qualify for a loan even if you do not have stellar credit. If you default on the debt, the VA pays back the lender a certain amount of money, which lowers the amount of risk that the lender is taking on. The lender is the one that is in charge of underwriting the loan, which means that it can lower its approval standards for credit factors.
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Chapter 7 Bankruptcy
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When you file for Chapter 7 bankruptcy, you get the opportunity to get rid of your debts by liquidating some of your property. This can be very damaging to your credit history overall. When it comes to qualify for a VA mortgage after filing for Chapter 7, you have to wait at least two years from the date of discharge of the bankruptcy. You have to explain why you had to file for bankruptcy and you must have taken steps to rebuild your credit since the bankruptcy.
Chapter 13 Bankruptcy
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The other type of bankruptcy that you could potentially file for is Chapter 13. With Chapter 13 bankruptcy, you do not risk losing any of your property but you do get protection from the courts from your creditors. You set up a repayment plan and repay your debts over a period of several years. If you filed for Chapter 13, you can possibly get a loan through the VA if you are still in the repayment agreement with the court as long as you have made your payments on time for at least a year.
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