While credit history is certainly an important consideration for VA loan eligibility, borrowers with low credit scores, poor credit history, and even bankruptcy can still gain approval for a VA loan. While individuals who have filed bankruptcy are generally not satisfactory candidates, there are things that can be done to qualify for a loan.
The VA loan qualification guidelines for individuals with a bankruptcy vary depending on a Chapter 7 or Chapter 13 bankruptcy. With a Chapter 7, the VA requires that an individual must wait no less than two years from the discharge date of the bankruptcy before qualifying for loan approval. Additionally, the individual must provide a full explanation of the Chapter 7 bankruptcy and have re-established good credit. Proof of job stability will also be necessary for approval.
With a Chapter 13 bankruptcy, the guidelines vary slightly. An individual may still receive approval for a VA loan even while still paying on their Chapter 13 bankruptcy. The borrower simply must have made their payments on time for at least one year. In order to verify this, the court trustee must give written approval before the loan can be approved. Like the Chapter 7 bankruptcy, a full explanation of the bankruptcy is required in addition to re-establishing good credit and proving job stability.
While individuals with a history of bankruptcy are not prime candidates for VA loan approval, they can still prove their capability to repay their VA loan and gain approval. It is important for individuals who qualify for VA loans through their VA benefits take the necessary steps to be able to take full advantage of these benefits to which they are entitled.