VA Home Loans and Bankruptcy/Forclosure

I receive a lot of questions regarding the VA home loan as it pertains to bankruptcy (BK) and foreclosures. Most of the time the questions are determining how long a borrower has to wait after their bankruptcy before they become eligible for a VA loan? Or is there anything I can do while I wait to help my chances of getting approved for a VA loan once their waiting or cooling off period is up. So lets dig in because as of right now the VA underwriting guidelines are some of the most liberal vs. conventional or FHA financing.

Chapter 7 Bankruptcy & VA Loans

First, a Chapter 7 Bankruptcy involves a complete discharge of debtors. Once the petition is file and accepted by the court and the BK is finalized the borrower is released from liability from the creditors. Generally, with a Chapter 7 bankruptcy the VA underwriting guidelines require a 2 years waiting period from the discharge date of the bankruptcy before financing becomes available. There are, however, certain uncontrollable circumstances such as medical conditions or job loss that allow for financing 1 year after the discharge date but these are very rare. To contrast this with conventional guidelines at the time of the article Fannie Mae requires a 4 year waiting period after a Chapter 7 BK.


Chapter 13 Bankruptcy & VA Loans

A chapter 13 on the other hand is called a wage earners plan. A trustee is appointed from the court and a repayment plan is negotiated. A veteran may actually be eligible for a VA mortgage while in the chapter 13 bankruptcy; but will need to have at least made 12 on time payments and have approval for the loan by the court trustee. Also, after the 13 is finished the veteran borrower is eligible immediately.

Foreclosure

The VA guidelines state the foreclosure period follow the same rules as the Chapter 7 Bankruptcy. Basically, the veteran borrower will need to wait 2 years.


Tips for after a Bankruptcy

As top VA lender that has dealt with their fair share of bankruptcies we’ve put together a few tips that borrower can put to go use.

1. I strongly recommend after the bankruptcy has been discharged you mail in a full copy of your discharge paperwork with all of the appropriate schedules to all three credit bureaus Equifax, Experian and TransUnion. Often time some of the accounts included in the bankruptcy won’t reflect they were discharged.

2. We suggest you start by pulling your credit at least once a year from each of the nationwide consumer credit reporting companies. Keep track of what’s gone on and make sure there are no inaccuracies by the time you are ready to apply for a VA loan.

3. In addition, if you don’t have any remaining creditors after your bankruptcy we strongly recommend reestablishing your credit if you have not already done so. Sometimes a borrower with a lack of credit is just as hard as approving borrowers with poor credit. And of course always, always, make your payments on time!

VA Cashout Refi's upto 100% and extended loan limits!!!

On October 10, 2008, the President signed the Veterans' Benefits Improvement Act of 2008. Following are the three major impacts to the VA Home Loan Guaranty Program:

1. Authority to guarantee adjustable rate mortgages (ARMs) and hybrid adjustable rate mortgages (HARMs) has been extended through September 30, 2012. Not a big deal I'm not a big fan as a VA orginator in their ARM loans. I haven't sold a single VA ARM.

2. The maximum guaranty for cash-out refinance loans has been made the same as purchase loans - they are no longer limited to $36,000. In addition, cash-out refinance loans may now be made up to 100% of the appraised value of the home. Wow this is huge news!! I've always gripped about previous the cash out limits of 90%. If you want to do a VA Refinance now is the time!

3. The temporary increase to the maximum guaranty has been extended through December 31, 2011. When combined with new locality-based Freddie Mac conforming loan limit in January 2009, VA's maximum county “loan limit” will be $1,094,625 ($1,641,937.50 in Alaska, Guam, Hawaii, and the Virgin Islands). This results in unique county "loan limits" for VA. This notice is meant to provide general information regarding the major impacts of the recently passed legislation. Awesome, this extends the VA Jumbo Loan limits in high cost areas. Click here for more information regarding VA Home Loans or VA Home Loan Purchase info.

$7500 1st time home buyer credit

Included in the same housing bill discussed in my previous post is a nice little 1st time home buyer tax credit, which in more accurate terms is more of an interest free loan from the government when you get down to the finer details. But hey, after the past couple of weeks with Fannie, Freddie, and AIG all getting government bailouts who doesn't deserve a little government assistance nowadays? I mean is beginning to seem commonplace. I'm still waiting for the bail out of my 401k haircut over the past few weeks.

Any way the deal is 1st time home buyers who purchase a house from April 9, 2008 and before July 1, 2009 are eligible for a $7500 credit off their taxes. The catch 22 is the credit is paid back over the next 15 years that inevitably makes it more of a loan that a credit. If you end up selling the house you will be required to pay back the remaining balance in full, but all in all I say take the money. A 0% loan is pretty hard to come by.

Note: there are a fee income restrictions to the credit.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Temporary Increase of the VA Home Loans up to $729,750 with Zero Down

On June 30th of this year president Bush signed the Housing and Economic Recovery Act of 2008. Part of the provisions in that bill was the increase in the VA home loan guarantee until the end of 2008. Up until now the VA loan has been capped at $417,000 in the lower 48 states for 100% financing. With this new bill the VA guarantee has now been increased up to a maximum of $729,750 with no down payment requirement, depending on the county. The only drawback is the maximum loan amount reverts back the $417,000 on Jan., 1 2009. Eligible veteran buyers that want to take advantage of this benefit need to act quickly.


Okay, here is how to look up the maximum loan amount for your particular county. Go to https://entp.hud.gov/idapp/html/hicostlook.cfm the select the appropriate state, enter the name of the county, select “Fannie/Freddie” for the “Limit Type,” and click “SEND.” The applicable maximum guaranty amount is 25 percent of the amount in the column labeled “One-Family.” or $417,000.00. Whichever amount is more.

For more information feel free to contact me over at http://www.smartvaloans.com/ for more information or VA loan approval.