FHA Loan

 Obtaining a VA loan after a foreclosure in Texas is not impossible. As you can probably image there are additional requirments to meet but current and past military personel are still eligible for a VA mortgage after a foreclosure.

Veterans are not eligible for a VA loan for 2 full years after their foreclosure. After this time veterans are allowed to apply for a loan again, but will face increased scrutiny and will likely have to respond to more questions during the application process.

Remember, while you are eligible to apply for a VA loan after 2 years, there are additional requirements that must be met which may vary by lender. Simply waiting out the recovery period does not guarantee you loan approval.

Also keep in mind that this rule does not only apply to veterans who previously had a VA loan. Even veterans who have had conventional mortgage foreclosures are subject to the same regulations.

For veterans who do have a recent foreclosure that involved a VA loan, there are additional restrictions.

First, to restore full entitlement after a VA loan foreclosure, the borrower has to completely pay back the VA the loss of the previously guaranteed amount.

It is possible to use partial-entitlement to get a VA loan, but without full entitlement a down payment will probably be required. Borrowers with past foreclosures will also be asked to provide details regarding the circumstances. If you can show that the cause of your financial trouble and foreclosure were largely out of your control, you may be able to increase your chances for approval.

Some examples of extenuating circumstances include:

• Unforeseen medical bills.
• Job loss.
• Certain lawsuits.

Examples of circumstances which probably won’t be considered to be extenuating are:

• Bankruptcy because of an entrepreneurial business venture.
• Getting divorced.
• Certain lawsuits.

Regardless of the scenario, there is no guarantee of approval or denial as decisions are made on a case-by-case basis.

Lastly, even though the VA does not disqualify veterans from VA loans after a foreclosure, it can definitely make the application process take longer than it normally would.

It’s not unusual to wonder if you will still be eligible for a VA loan in Texas after a bankruptcy.  The guidelines seem to keep changing with regards to this question and with the recent economic recession just barely behind us, many veterans and military personnel are now in the position of looking for a new mortgage after having gone through a recent bankruptcy.

Some of the most common questions asked regarding bankruptcies and VA loans are:

• Can I even get a VA loan after a bankruptcy?
• If so, how long do I have to wait?
• What can I do to increase the likelihood of getting approved for a new VA loan after a bankruptcy?

The good news is that as of today, the VA underwriting guidelines are far more relaxed than the guidelines for conventional or FHA loans.

With that said, let’s now go ahead and take a look at the different types of bankruptcies and how they impact VA loans…

Chapter 7

Chapter 7 bankruptcies are essentially when the borrower is freed of all liability from creditors. VA loan guidelines typically call for a 2 year waiting period after a Chapter 7 bankruptcy before you can receive VA financing again.

This 2 year requirement may seem harsh, but compared to the guidelines for conventional loans that call for a 4 year waiting period, it really is quite reasonable.

Chapter 13

Chapter 13 bankruptcies involve the establishment of a repayment plan instead of being cleared of liability.

Veterans and military personnel can qualify with VA loan guidelines even when they are still in Chapter 13 bankruptcy. However, you will have to show that you have made a minimum of 12 payments on-time and be approved by the court trustee for the loan.

Please note that once the Chapter 13 bankruptcy is complete, veterans are instantly eligible for VA loans again, whereas conventional loan guidelines still require a 2 year waiting period.

Even after you have finished the bankruptcy process, there are still actions you can take to increase your likelihood of qualifying for a VA loan after bankruptcy.

For example:

Reestablish your credit as soon as possible if you do not have any creditors after the bankruptcy process. Remember, approving a potential borrower with no credit can be just as difficult as approving a borrower with bad credit!

Once you reestablish credit, be sure to always make payments on time.

Get in the habit of checking your credit at a minimum of once a year. This will give you an idea of where you stand, especially when you begin shopping for a VA mortgage.

Upon the discharge of your bankruptcy, send a copy of all your discharge paperwork (including all applicable schedules) to the three credit bureaus: Equifax, Experian, and TransUnion.