Filing bankruptcy can delay your VA home loan eligibility. In fact, many veterans believe a chapter 7 bk sets them back 2 years. While 2 years is the standard post chapter 7 bk wait for a VA loan, the real time-frame answer is far less simple.
VA Home Loan in 1-2 Years After Bankruptcy
The VA allows flexibility with regard to veterans who filed bankruptcy. In fact, VA rules read as follows:
“The fact that a bankruptcy exists in a veterans credit history does not in itself disqualify the loan. (Lenders must) Develop complete info on the facts and reasons of the bankruptcy. Consider the reasons for the bk and the type of bk filing.”
In other words, VA asks lenders to review why the clients filed chapter 7 bk. Veterans who meet the two criteria below are eligible for a VA mortgage within 1 to 2 years after their chapter 7 bk discharge date.
- Applicant has positive credit after their bankruptcy
- Extraordinary reasons caused bankruptcy
Self-Employed Veterans and Bankruptcy
Self-employed veterans who filed chapter 7 bankruptcy are in luck. VA home loan rules establish a carve out to assist self employed veterans. When their bankruptcy was the result of a business failure, self employed veterans are eligible for a VA loan sooner than 2 years. The keys are:
- Veteran obtained full time work after business failure
- No poor credit exists prior to self-employment
- No poor credit exists prior to the bankruptcy
- Applicant’s misconduct did not cause bankruptcy
Your Arizona VA mortgage lender should guide you through the process of applying for bankruptcy related exceptions.
By Jeremy House