Buying first home using VA Home Loan Program, help

[jayson1]

Hi, I had a chp7 discharge in Jan of 2009 when I was going through a divorce after returning from overseas in the military. Basically the only thing discharged was a repossessed car that she didn't want to pay. I had no credit card debts and that car hurt my credit a lot. Flash forward to now, I am looking to buy my first home. I have a great job working for the government and I am a former Iraq vet and was interested in using my VA Home Loan. My fico is around 590 across the board. I only have a car loan now with no other debt. I was wondering how the BK will effect my use of the program? The house is priced at $180K and very modest, I was planning on using my TSP to fund the down payment. Am I too early to look to purchase or should I wait. Is any creditor going to give me the time of day considering my past situation. Where should I start? Any advice you can give would be greatly appreciated.

[HHM]

My understanding is that VA loans have the same 2 year requirement as FHA loans when it comes to chapter 7 BK. Every reference I have found mentions a 2 year waiting requirement from date of "discharge."

So, you will need to wait another 4-5 months, assuming your discharge was in Jan. 2009.

[dragon]

Directly from the VA:
Q: Can I get a VA loan if I have had a bankruptcy in the last few years?

A: The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rules apply:

* If the bankruptcy was discharged more than 2 years ago, it may be disregarded
* If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met:
o you and/or your spouse have reestablished satisfactory credit, and
o the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)
* If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.

I can't post the link since I don't have at least 15 posts. However, if you do a google search for "VA Home loan bankruptcy" it should pop up for you. Good luck!

[LSUTiger32]

I was going to say, you are close enough at this point that I would contact a mortgage broker and let them start to see what they might be able to get for you. Start getting some information and feeling it out. It sounds to me like you should be good to go to close in January....although your FICO is low. I would spend these next few months also pulling your free credit reports from annualcreditreport.com and seeing if everything is reporting correctly.

Lastly, DO NOT use a TSP loan to fund your down payment. You will pay a 10% penalty plus your tax rate on the money. Therefore if you pull out $50,000 from it you will pay about $20,000 of it to Uncle Sam. Now, with your TSP you can borrow up to $50,000 (I believe that is still the limit) on a loan for a home purchase but you will pay that back out of your check and it's a horrible idea generally. You will lose all of that money power out of your TSP and your paycheck will take a large hit at a time when you need all the money (starting out with a new house).

Hope this helps!

[dragon]

Lastly, DO NOT use a TSP loan to fund your down payment.

x 2 on this one. Mortgage interest is deductible. If it's a VA loan, you can do 0 down. TSP has a good fact sheet on using TSP dollars for a down payment. In the end, it doesn't work to your advantage and you actually lose money on the deal.

[Ugh07]

VA is zero down anyway, no reason to borrow a down payment that is not tax deductible. Work on your score though, while VA may not care, most lenders are going to have guideline overlays that require a 620 score.

[Tom_Mi]

Jayson1, let us know how it goes.
My 2yr point is April, hoping to do the same thing.