Veterans Can Get A VA Home Loan
Even After A Bankruptcy
Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
You may not believe it. And it may not be what you've heard.
But it's TRUE.
If you are a veteran - or an active duty service member...
You Can Get A VA Home Loan Even After A Bankruptcy
Now you have to follow the rules. And you can't get another VA home loan right away. You have to wait at least two years after your bankruptcy discharge date before you are eligible for home loan benefits.
However, in some cases, the Department of Veterans Affairs will allow you to use your benefits sooner. This may happen in cases where the bankruptcy was out of your control; for example, in case of a death, illness, or other reason that caused a loss of income. You would need to show the mortgage lender your on-time, court-approved payments as well as a VA-approved reason for your bankruptcy.
When you choose a lender, it's important to select a lender that is familiar with the VA loan process. Also, you should know that the lender may have different terms from the VA. Still, if the lender is accustomed to working with veterans, you'll find the process much easier than if the lender does not have VA experience.
The most important step after your bankruptcy is to rebuild your credit, and that starts with getting copies of your credit reports from all three national credit bureaus. Then follow these steps:
1. Check each report closely for errors because each error could lower your credit score. If you see an error, make sure you dispute it online or in writing.
2. Pay all of your bills on time. If you have any late payments, and if even one late payment is reported to the credit bureau, the lender could use that as its reason to deny your loan.
3. Apply at your local bank or credit union for a savings-secured loan. You give the bank a certain amount of money, which they put into a savings account. The bank then lends you the amount of money in your account and freezes the account as security for the loan. Each time you make a payment on the loan, the bank releases that amount in your savings account.
4. Ask someone in your family to add your name as an authorized signer on a credit card in good standing. Even if you don't use the credit card, the fact that you're on the account will help improve your credit score. OR
5. Open a secured credit card. This is similar to the savings-secured loan. You put a certain amount of money on deposit with the bank. The bank gives you a credit card with a limit equal to the amount of money it holds as security. You can then charge on your credit card and build a positive credit history. You'd do well to keep the percentage of credit before 50% because if you charge over 50% of your limit, you may hurt your credit score.
If you follow these steps and rebuild a good credit score, the Department of Veterans Affairs will again make you eligible for your VA home loan benefits.