Many Veterans have past outstanding debt that is unpaid on their credit reports. It's very common that Veterans will go ahead and pay off the debt on their own before consulting with a VA Loan Officer. If you are purchasing a home with your VA Loan in Vancouver, WA, or Portland, OR, make sure you consult with a professional mortgage banker who has vast knowledge in VA Loans. I'll explain why.
You may have an excess of debt to the point where bankruptcy is needed. There are two types of bankruptcies for consumers. Chapter 7 where all of the debt is released, and you essentially start with a clean slate. And a Chapter 13 where a payment plan is established that is affordable with your household income.
Which one do you qualify for? It's hard to say because there is a calculation that must be done and only bankruptcy attorneys can accurately do this. But, you can always start with a VA Loan Officer. They can at least say if it would be a good idea to speak with one. There are many attorneys in Vancouver, WA, and Portland, OR, who you can speak with.
Many Veterans believe that if they file bankruptcy, they will not be able to purchase a home ever with their VA Loan. This is not true. When you file for a Chapter 7 bankruptcy, the VA only requires 24 months to pass after the discharge date before you can close a loan with your VA benefits. The date of discharge is the 90-day mark after the day you file. Many Veterans think that bankruptcy will ruin their credit forever, which is not true. It only prohibits a VA home loan for 24 months. A Chapter 13 bankruptcy only requires 12 months after the date of discharge.
Many times a Veteran will qualify for their VA home loan in Vancouver, WA or Portland, OR area and still have some outstanding debt that needs to be paid before closing.
Say for example a collection or credit card that is rather small in amount. Make sure that if you have any debt that is being required to be paid off before closing that you do not pay for it until the actual closing date. Wait until you go to closing and provide the money to the escrow and title company the day you sign your paperwork on closing. They will take the money and send it to who you and will also document the payment on the HUD-1 which will be provided to the underwriter and the VA.
The reason you must do this is, if you were to pay the debt on your own, say a couple of weeks before closing, it normally takes four to six weeks for that creditor to update their system and the credit bureaus. Then, when you show up for closing, the clearing of the debt will be very difficult to prove. To meet the closing date, you will have to pay the debt again and then recover the first payment at a later date, which could take a great deal of time.