The biggest advantage of VA home loans is that a part of the loan amount is guaranteed by the Veterans Administration. As a result, these loans are provided to borrowers at a far lower interest rate in comparison to other traditional loans because lenders are assured of their money. Moreover, down payment is not at all a compulsory with VA loans, thus making them an even more attractive and viable home financing option.

However, there are certain restrictions under VA loans that also determine the eligibility of the applicant. These restrictions are mainly for applicants who have either a bad credit record or those who have filed for bankruptcy. Some of these restrictions are listed below:  

1. In case of a Chapter 13 bankruptcy filing, the applicant has a minimum waiting period of 12 months before he/she can apply for a VA loan. Loan approval is only possible if the borrower is able to show any evidence of making concrete efforts in order to improve his credit history. The applicant is also required to obtain permission from the court trustee so as to apply for a VA loan.

2. In case of a Chapter 7 bankruptcy filing, the applicant has to wait for at least 2 years and reestablish credit before applying for a VA loan. This waiting period is calculated from the day the applicant has been discharged from bankruptcy.

3. Veterans lacking credit history can also apply for a VA loan. However, the credit history of the applicant in this case is established by the underwriter by taking into account aspects like rent payment, payment of phone bills and other utility bills.

4. Veterans, who were unable to repay their loan and had to lose their home due to foreclosure, cannot apply for a VA-guaranteed home loan.