I have a VA 4.74% VA loan with a bal. of 186,400. In Feb. 2010 I filed Ch 7 BK and was discharged in July 2010. My credit score is about 625 and my house is underwater at $159,000 value according to the agent who sold these properties. Since I went BK, Citimortgage is not not reporting my payments and basically wrote off the loan. My attorney failed to get the reaffirmation form and that's why my credit report shows 0 bal. due and 0 payments since Feb. 2010. Should I refi and if so can I avoid increasing my bal. other than by adding the VA funding fee which I know I have to pay?
points 
Answer #1
Bankruptcy does not in and of itself disqualify you for refinancing your home. If the Ch 7 BK was less than 2 years as it appears it was, then VA wants to see that some new credit has been established since and the the cause of the BK in the first place was caused by documented circumstances outside the control of the borrower (illness, layoff, etc.). VA does not necessarily have a credit score requirement although individual lenders might require minimum credit scores for VA transactions. As for the failure of your attorney to process the proper paperwork, you should contact them to finish their job. The credit reports can be updated with written verification of account status received from your current mortgage holder. The title company will also receive a written payoff from your investor showing the current balance on the loan. As for being underwater, VA has a maximum loan amount of the lesser 100% of the appraised value of your home or the outstanding balance plus allowable closing fees. There is however a program that doesn’t require an appraisal called an Interest Rate Reduction Refinance Loan that is solely for the purpose of reducing the rate on an existing VA loan. The closing fees can also be included in the IRRRL program.