By Jane Lasky
Filing for bankruptcy is never an easy decision, because it comes with serious consequences and severely impacts your credit. But sometimes, filing for bankruptcy is the only way to get out from behind crushing debt. Likewise, foreclosure comes with a set of financial ramifications, but life happens, and sometimes it is unavoidable. If you have either of these instances on your credit report, applying for a loan can be extremely difficult and stressful. However, you may still qualify for a VA loan following bankruptcy or foreclosure.
Shorter Penalty Periods
For veterans, the time period for forgiveness following a bankruptcy or a foreclosure may be shorter than traditional applicants. As such, you may be able to qualify for a new home loan or other large loan more quickly than a civilian. According to the Veterans Affairs blog, “VA Loans also allow Veterans and active military to bounce back faster after a bankruptcy, foreclosure or short sale. You can be eligible for a VA Loan two years after a Chapter 7 bankruptcy discharge; one year after filing a Chapter 13 bankruptcy; and two years following a foreclosure.” For many civilians, the waiting period can be up to seven years.
Fixing Your Credit
Although the grace period for veterans is shorter, you will still need to repair your credit. In general, VA loans for homes still require a credit score of around 620 or higher. This is lower than traditional lenders, but you should spend the time in your grace period working on your credit. Getting a secured loan or a secured credit card and making payments on time can help to show that you are no longer as big of a credit risk. Secured credit cards require you to pay a sum up front, which then becomes your credit line. They are an excellent means of rebuilding credit after a bankruptcy.
If you’ve served in the military, you are eligible to receive a VA loan, which can help finance your next home. This often overlooked resource is a great method for buying a new place. Even if your credit is less than perfect, you may still qualify. Talk to a Prime Choice Finance specialist to determine whether you qualify and to review your loan options.