How to Buy a Condo with a VA Home Loan

Purchasing a condo can be a great option for veterans active duty service members and qualifying spouses looking to buy a home using VA home loan benefits. Condos offer many advantages over single-family homes, like amenities, less maintenance, and often more affordable prices. However, there are some additional requirements and restrictions when it comes to buying a condo with a VA home loan. In this article, I’ll provide a comprehensive guide on everything you need to know about purchasing a condo with VA financing.

Overview of Buying a Condo with a VA Loan

The Department of Veterans Affairs has specific guidelines that condo projects must meet in order to be eligible for VA home loans The main purpose of these requirements is to protect VA loan holders from being subject to overly restrictive condo association bylaws

The key things to know are:

• The condo development must be specifically approved by the VA. Many condos across the country already have VA approval, but some do not.

• If the condo you want is not yet VA approved, it is possible to go through a VA approval process, which can take several months.

• Once a condo development is approved by the VA, the approval remains in effect permanently.

• Your lender will check the VA’s condo approval database to see if the specific condo you want to buy already has approval.

• If not approved, the lender can submit a request to the VA on your behalf to try to gain approval.

Benefits of Buying a Condo with a VA Loan

There are many good reasons why a condo can be a great fit for veterans and military homebuyers using VA loans:

• No downpayment required – This key VA loan benefit remains in place for condos. As long as you fully qualify, you can buy a condo with 100% financing.

• Lower rates – VA loans typically have very competitive interest rates, which apply to condo purchases. Rates are often lower than conventional or FHA loans.

• Lower fees – VA loans allow sellers to pay many of the closing costs and fees. This helps keep your out-of-pocket costs down.

• Relaxed guidelines – The VA has flexible credit and income guidelines compared to conventional loans. There’s no minimum credit score requirement.

• Amenities – Many condo communities have pools, fitness centers, clubhouses and other shared amenities perfect for military families.

• Maintenance – Condo associations typically handle exterior maintenance and repairs, allowing you to avoid those hassles and expenses.

• Better locations – Condos are often built in highly desirable urban areas, close to bases and post amenities, unlike rural single-family homes.

VA Condo Approval Process

If the specific condo you want to buy is not already VA approved, here is the process to try to gain approval:

• Your lender will submit a request to the VA on your behalf, along with condo association documents like bylaws, budget, meeting minutes, etc.

• The VA will review the request and determine if the condo meets all eligibility criteria.

• The VA responds with either an approval, a request for more information, or a denial.

• It typically takes 2-4 months for the VA to fully process a condo approval request.

• Approvals remain valid permanently once granted.

• Your real estate agent and lender can advise you best on navigating the approval process.

• Having a real estate attorney submit an opinion letter can help expedite VA condo approvals.

What Makes a Condo Ineligible for VA Loans?

The main reasons a condo development would fail to gain VA approval include:

• Owner-occupancy – The VA wants at least 50% of the units to be owner-occupied, not rentals or investment properties.

• HOA delinquencies – No more than 25% of unit owners can be delinquent on HOA fee payments.

• Investor concentration – A limit of 10% of units can be owned by one entity.

• Right of first refusal – Bylaws giving the condo HOA first right to purchase units can cause issues.

• New constructions – Developments less than 75% sold will likely not be approved until more units are purchased.

• Litigation – Any pending litigation or major defects can cause a condo to be denied.

Alternatives if Your Condo is Not Approved

If you have your heart set on an unapproved condo, you do have some options:

• Ask the condo association to apply for VA approval on your behalf.

• See if your lender can find grounds to get the condo approved.

• Consider using another type of mortgage if waiting for approval is not feasible. You may be able to refinance later into a VA loan once the condo gains approval.

• Look at other condos in the area that already have VA approval.

• Purchase the condo you want using a different type of financing, then rent it out until VA approval is gained so you can move in later with more favorable VA financing.

Tips for Buying a VA Approved Condo

Here are some key tips to streamline the process of purchasing a VA approved condo unit:

• Find a knowledgeable real estate agent familiar with VA condo approvals in your area.

• Get prequalified from a lender specializing in VA loans. Confirm they handle VA condo approvals regularly.

• Check condo fees, reserves, litigation status, and other association financials. Make sure the HOA is financially stable.

• Review condo bylaws for any red flags like age restrictions, limits on rentals, rights of first refusal, etc.

• Calculate your total monthly costs including mortgage payment, taxes, insurance, utilities, HOA fees, etc. to confirm affordability.

• Drive the neighborhood at different times to check noise levels, parking, busy roads, etc. that could impact livability.

• Thoroughly evaluate the condo unit itself for defects, evidence of leaks, loud neighbors, and other issues affecting your enjoyment.

VA Condo Financing FAQs

Here are answers to some frequently asked questions about obtaining VA mortgage financing for a condominium purchase:

How do I check if a condo is VA approved?

Your lender can search the VA condo approval database. You can also request an approval status by filling out a form on the VA website.

What VA requirements apply to condos?

Limits on investor-ownership, delinquent HOA fees, pending litigation, resell restrictions, and adequate insurance coverage.

Can lenders impose additional condo requirements?

Yes, lenders may have overlay guidelines on top of VA’s minimums. Such as higher owner-occupancy percentages.

What documents are needed for VA condo approval?

The condo association must provide governing docs like bylaws, budget, financials, meeting minutes, litigation statements, and more.

How much longer does VA condo approval add to the process?

You should expect it to take 2-4 months longer to close if your lender must newly submit condo approval paperwork to the VA.

Can I buy a condo that is approved by FHA but not the VA?

No, VA approval is required even if HUD has approved the condo for FHA financing in the past.

What happens if my condo loses VA approval?

Previously approved condos remain eligible. Approvals are only revoked in rare cases of fraud or major litigation.

The Bottom Line

Buying a condominium can be a great option for servicemembers and veterans using VA home loans. Just be sure to work with a lender experienced with VA condo approvals. Confirm VA eligibility and plan for a potentially longer closing timetable if your particular condo must still be approved. With proper guidance, you can smoothly navigate the condo purchasing process and enjoy all the advantages of owning a condo with your hard-earned VA home loan benefits.