How to Buy a Condo Using a VA Loan

Buying A Condo With A VA Loan

VA loans, supported by the Department of Veterans Affairs, offer accessible mortgage and housing solutions to veterans, active military members, and their eligible spouses without requiring a down payment and providing lower interest rates compared to other financing methods. Opting for a VA loan to purchase a condominium is an excellent decision for those who qualify, ensuring the property is VA-approved.

This article will explore the benefits of owning a condo with a VA loan, the process of purchasing one, the criteria for VA loan eligibility for condos, and options for acquiring condos that do not meet these criteria.

The Appeal of Condos for Military Members 

Firstly, it’s important to understand the VA’s perspective on condos. The VA sees a condominium complex or planned unit development as a shared interest community where residents share common areas such as playgrounds and parking spaces.

Condominiums can be an attractive investment for several reasons. They are often more affordable than single-family homes, located in sought-after areas, and come with amenities that cater to military personnel and their families, such as fitness centers, pools, and community areas. Condos provide a range of lifestyles, from active social environments to peaceful retirement settings.

Younger service members or those living alone might find the condo lifestyle preferable due to the close community and lack of responsibility for maintenance and upkeep. This appeal also extends to those who are not interested in the physical demands of maintaining a single-family home.

Condominium complexes typically have a homeowners association (HOA) that manages maintenance, which can be a significant advantage for buyers who prefer not to engage in direct upkeep. While HOA fees do not contribute to home equity, they cover maintenance and often utilities and services, offering the convenience of having someone else manage repairs while still allowing homeowners to build equity.

However, HOAs come with their set of bylaws, including rules and regulations that aim to maintain uniformity and order within the community. These rules may govern home modifications, noise levels, and pet ownership, which can be seen as restrictive by some. Nonetheless, these regulations also ensure consistency and standards across the community, benefiting all residents.

Is It Possible to Purchase a Condo Using a VA Loan? 

In short, the answer is affirmative.

Expanding on that, acquiring a condo with a VA loan aligns closely with the process of purchasing any type of property, with the key stipulation being that the condominium complex must have VA approval. This approval criterion is designed to shield VA loan beneficiaries from potential issues related to the homeowners association (HOA). The same approval requirements apply to townhouses as well.

Before setting your heart on a specific condo, it’s crucial to verify that its complex or development’s HOA has secured VA approval. This step safeguards the interests of both individuals holding VA loans and the government, which underwrites these loans. Any condo complex you’re considering must adhere to the VA’s standards. For a comprehensive overview of what these standards entail, refer to chapter 16 of the Department of Veterans Affairs Lender’s Handbook. Additionally, the VA’s website provides a tool for checking a condo’s approval status.

Your real estate agent can offer guidance through the process of verifying VA condo HOA approvals, helping to streamline your purchase.

Reasons a Condo HOA Might Fail to Gain VA Approval 

The Department of Veterans Affairs (VA) sets rigorous criteria for a condominium complex to be considered suitable for VA loan eligibility. A condo’s homeowners association (HOA) plays a crucial role in this approval process, and several factors can lead to their disqualification.

One significant factor is if the HOA’s bylaws include a right of first refusal clause concerning the sale of condos. This clause implies that:

• The HOA has the priority to purchase a property before the owner sells it to someone else.
• It allows the HOA to match the offer of any prospective buyer.
• The HOA might use this right to acquire units for communal purposes or for use by the property manager.
• This clause can also serve to prevent sales at prices that might negatively impact the valuation of other units in the complex.

Another critical consideration is the owner-occupancy rate within the condo complex. The VA generally requires that at least 50% of the units are owner-occupied. This rule aims to reduce the number of units used as rental properties or owned by investors.

Furthermore, the VA mandates that a minimum of 75% of unit owners be up-to-date on their HOA dues. There may also be a limit on the fees that an HOA can levy.

For new developments, the VA typically defers approval until 75% of the units have been sold. Additionally, no more than 10% of the units in a development can be owned by a single entity, whether that’s an individual, an investor, or a corporation.

Exploring Options for Non-VA Approved Condos 

If you’re interested in a condo that hasn’t received VA approval, you’re not without recourse. The most straightforward strategy is to focus your search on condos that are already approved.

However, if you’re set on a specific condo that lacks VA approval, initiating the approval process is possible. This effort will require collaboration with the HOA and your mortgage lender.

Prospective buyers can request that the HOA applies for VA approval. This process is intricate, involving substantial paperwork and potentially extending over several months, thus prolonging the buying process. As legal advice is often sought during this process, the HOA typically bears the cost. The presence of an attorney opinion letter can sometimes expedite the VA’s review process.

Your mortgage lender may also assist in getting the condo project added to the VA’s approved list, given their familiarity with such matters. Your real estate agent could provide valuable support in navigating these steps as well.

VA Loans, Condos, and Their Approval Process: Common Questions Answered

Seeking insights into VA loans and their application towards condominium purchases? Below, we address several frequently asked questions on the topic.

What advantages do VA loans offer for condo purchases? Utilizing a VA loan to buy a condominium often means you can bypass the need for a down payment (in most cases) and avoid private mortgage insurance (PMI). VA loans for condos are generally associated with lower interest rates compared to other financing options and entail fewer closing costs.

Does VA condo approval have an expiration date? Approval from the Department of Veterans Affairs for a condo is perpetual, eliminating the need for renewal.

Is it possible for a condo to be approved by the VA but not the FHA? Yes, it’s possible for a condominium to receive VA approval without being approved by the FHA. While the approval processes for both have similarities, they are distinct. Previously, VA and FHA approvals were interchangeable, but that policy has changed.

How can I access the VA’s guidelines for condo approval? To understand the VA’s criteria for condo approval, refer to chapter 16 of the Lender’s Handbook provided by the Department of Veterans Affairs. If the condominium you’re interested in isn’t already approved, you can initiate the approval process via your HOA.

Where can I find a list of VA-approved condos? The official directory of VA-approved condos is accessible by submitting a request on the VA’s website for a customized condo report. Alternatively, a real estate agent knowledgeable about your area of interest can assist in identifying VA-approved properties.

Summarizing VA Loans and Condo Purchases Navigating the VA loan process for acquiring a condo may seem daunting due to additional steps, but the benefits are substantial. These loans ensure that the condominium developments are sound investments for you by evaluating factors such as HOA fees, the financial health of other unit owners, and the owner-occupancy rates within the development or complex.

Before applying for a VA loan for a condo purchase, ensure you have your Certificate of Eligibility (COE) ready, which confirms your status as an eligible service member, veteran, or surviving spouse. Your mortgage lender can assist in obtaining this certificate. Additionally, be aware of your VA entitlement amount, which represents the maximum sum the VA commits to repaying your lender should you default on the loan.

Considering purchasing a condo with a VA loan? Begin the approval journey with Elevation Mortgage and determine your eligibility for a VA loan to kickstart your condo search promptly.