If I file Bankruptcy, how long must I wait before I can buy a home?
Part 2: Chapter 7 and VA Loans
The VA handbook for lenders states, "If the bankruptcy was discharged more than two years ago, it may be disregarded."
If the discharge was between one and two years ago, the VA loan guarantee may still be granted if it meets certain conditions. “The borrower or spouse has obtained credit subsequent to the bankruptcy and has met the credit payments in a satisfactory manner over a continued period; and the bankruptcy was caused by circumstances beyond the control of the borrower or spouse, e.g., unemployment, prolonged strikes, medical bills not covered by insurance.”
If the bankruptcy is more than two years old, it should not be considered in factoring eligibility for a VA loan. If the bankruptcy is less than two years, but over one year old, you can expect to show that you have built some post-bankruptcy credit and you must be able to show that the bankruptcy was caused by a situation that was completely outside of your control.
But what about the rate you can expect to get? I’m sure many of you think that after bankruptcy, you can never get a decent interest rate. You may find it surprising that if you obtain home loan financing with a FHA or VA loan guarantee, the loan rate is based on the guarantee status of the loan. As such, the rate is generally not affected by the bankruptcy. The rate is, however, still based on your credit score, so it is important not to make late payments or default on any credit you had or have obtained since your bankruptcy.
If you would like to explore your debt-relief options, give my office a call. We will schedule a free consultation where we can look into your specific situation and determine what could best fit your needs.
Courtesy of Amy Spencer-Martyn
Spencer-Martyn Law Offices
Redding, CA 96002
This information in this article is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.