Qualifying for a VA loan after bankruptcy

Veterans can buy a home after bankruptcy or foreclosure

Veterans and active-duty military personnel can still be eligible for a VA loan after a bankruptcy. In fact, it may be easier for military families who've experienced bankruptcy to qualify for a VA loan compared to other types of home loans.

The kind of bankruptcy you've filed affects your eligibility, and the mortgage application process requires additional steps. Here's what you need to know.

VA loans after Chapter 7 bankruptcy

Chapter 7 bankruptcy is often called "liquidation" bankruptcy and usually involves selling property to pay debts. If you had a Chapter 7 bankruptcy that was discharged more than two years ago, the Department of Veterans Affairs allows us to disregard it when considering your application for a VA loan. You'll still need to meet credit, financial, and income standards to be approved.

If your Chapter 7 bankruptcy was discharged more than one, but less than two years ago, you may still be eligible. You will need to have established a credit history after the bankruptcy (i.e. show that you have obtained consumer items on credit subsequent to the bankruptcy and made payments over a continued period) and demonstrate the bankruptcy was caused by circumstances beyond your control to qualify.

VA loans after Chapter 13 bankruptcy

Chapter 13 bankruptcy is often called "reorganization" bankruptcy and usually involves a repayment plan that can help you pay debts without selling property. If you satisfactorily completed the repayment plan, you can be eligible for a VA loan.

If you have made at least 12 months of payments toward this plan, you may be eligible if the trustee or judge overseeing your bankruptcy approves the application. Like Chapter 7 bankruptcy, you need to meet financial and income standards to be approved.

VA loans after foreclosure

Having a foreclosure in your credit history does not disqualify you from getting a VA loan. You'll likely need to document the circumstances of the foreclosure when you apply. If the foreclosure involved a VA loan, you may not be able to use your full entitlement on a new mortgage.

Look for ways to increase your eligibility

Bankruptcy and foreclosure don't disqualify you from getting a VA loan in many cases. But you still need to establish a good credit history and meet financial and income standards to get approved. If you are in a waiting period for VA loan eligibility, work to establish a history of paying your current bills in full and on time. Also check your credit report for errors and work to correct any you find. This may improve your chances of qualifying.

*Freedom Mortgage is a top VA lender in the United States according to Inside Mortgage Finance, Jan.–Jun., 2024.

Last reviewed and updated February 2024 by Freedom Mortgage.