VA Loans for Condominiums: A Complete Guide for 2023

Purchasing a condominium can be an excellent option for veterans, active-duty service members, and qualifying spouses looking to buy a home using VA loan benefits. VA loans require no down payment and have competitive interest rates compared to other loan programs. However, there are some additional steps required when using a VA loan to buy a condominium.

In this comprehensive guide, we’ll explain everything you need to know about getting approved for a VA loan for a condo, from start to finish.

What is a VA Loan?

First, let’s recap what VA loans are and who is eligible. VA loans are mortgages backed by the Department of Veterans Affairs that help eligible borrowers buy, build, remodel, or refinance a home without requiring a down payment in most cases

To be eligible for a VA home loan, you must be one of the following:

• A veteran who served at least 90 days of active duty during wartime or 181+ days during peacetime
• An active-duty servicemember
• A qualifying surviving spouse of a veteran or servicemember who passed away in the line of duty or from a service-related disability

Some of the key benefits of VA loans include:

• No down payment required for most borrowers
• No monthly mortgage insurance
• Competitive interest rates
• Ability to roll closing costs into the loan amount

Now let’s look specifically at using VA loans to purchase condominiums

VA Condo Approval Process

The VA has some additional requirements when it comes to financing condos with VA loans. The condominium complex must be approved by the VA before you can obtain a VA mortgage to purchase a unit.

This approval process ensures that the condo development meets the VA’s standards and doesn’t place any unfair restrictions on veteran borrowers It also protects the interests of the VA and lenders

Here are the key steps in the VA condo approval process:

• The condo homeowners association (HOA) submits an application and required documents to the VA through a lender. This includes the HOA bylaws, budget, financial statements, and more.

• VA officials review the application and determine if the condo development meets all of the VA’s condo approval guidelines.

• The VA will either approve the condo or deny approval and notify the lender. The process typically takes 2-4 months.

• Once approved, the condo remains eligible for VA loans permanently. No renewal is required.

• Veterans can only obtain VA financing for units in approved developments.

VA Condo Requirements

The VA has requirements that condo developments must meet to gain approval. These include:

• Owner-occupancy rate: At least 50% of the units must be owner-occupied. VA lenders may flag developments with lower owner-occupancy.

• Pre-sales: For new constructions, at least 75% of the units must be sold or under contract before the VA will approve financing.

• HOA dues delinquency: No more than 15% of unit owners can be overdue on HOA fee payments.

• Single entity ownership: No single entity can own more than 10% of the units. This prevents investors from owning a disproportionate share.

• Litigation: The HOA must provide a statement on pending litigation or uninsured losses that may impact the financial stability of the condo development.

• Budget: The HOA must have an adequate budget and reserves to provide for maintenance, improvements, and amenities.

• VA approval: The condo cannot be on the list of projects previously rejected for approval by the VA.

Meeting these requirements ensures the condo development is fiscally stable and a sound investment for VA borrowers.

Finding VA Approved Condos

The VA maintains a searchable database of all approved condo projects on their website. You can search by location to see which developments in your area meet the requirements for VA financing.

Veterans United also provides a VA condo lookup tool to easily search for approved condos by city, state or zip code.

If the specific condo you want to buy hasn’t been approved yet, don’t worry. Your lender can submit a request to the VA on the condo’s behalf to get it approved. Just be aware it may add 60-120 days to the financing process.

Financing a Non-Approved Condo

If your heart is set on a condo that isn’t yet approved by the VA, you may still have options:

• Ask the HOA to apply for VA approval. Work with your lender and HOA to submit the required documents to get the condo approved.

• See if it’s eligible for other types of financing. Check to see if it meets FHA, USDA, or conventional loan requirements.

• Make a larger down payment. On a conventional loan, you may be able to put down 25-30% to avoid extra lender requirements.

• Offer cash. Consider making a cash offer not contingent on financing if you can afford it. But make sure you have the condo documents reviewed by a real estate attorney first.

• Rent instead. Renting gives you time for the HOA to potentially get VA approval so you can buy later.

Talk to your lender to discuss all your options if your preferred condo isn’t yet VA approved.

Using a VA Loan for New Construction

Brand new condo developments face additional requirements to gain VA approval. At least 75% of the units must be presold or under contract before the VA will approve financing.

For new constructions without the required presales, you have a couple options:

• Make a cash purchase or use a different type of financing. After the sales threshold is met, refinance into a VA loan.

• Rent until the minimum presales are met, then purchase with VA financing.

New constructions can be riskier investments, so the VA wants to ensure enough units have sold at market rates before approving financing. Work closely with your lender so you fully understand the process.

VA Condos with HOAs

Most condominiums have a homeowners association (HOA) that handles maintenance, repairs, and manages common areas. VA guidelines help protect borrowers from HOAs with unfair rules or financial issues.

When reviewing a condo, watch out for HOAs with:

• Age restrictions – The VA scrutinizes age-restricted communities more closely to ensure fair housing laws are followed.

• Right of first refusal – Bylaws giving the HOA first rights to purchase your unit will lead to VA loan denial.

• Pending litigation – Lawsuits against the HOA may impact future assessments and fees.

• High HOA dues or special assessments – Make sure you can fit the HOA fees into your budget long-term.

• Delinquent owners – A high percentage not paying dues indicates potential financial issues.

Carefully review the HOA bylaws, budget, and financials when considering a VA condo purchase.

VA Condos vs. Single-Family Homes

Condos have pros and cons compared to single-family homes. Consider these factors when deciding which to purchase:

Pros of condos:

• More affordable purchase price
• HOA handles maintenance and repairs
• Amenities like pools, gyms, clubhouses
• No yardwork
• Access to public transportation

Pros of single-family:

• Privacy
• Ability to customize and renovate
• Potential for higher appreciation
• No shared walls
• No HOA fees
• Yard space

Think about your lifestyle, budget, and future plans to decide if a condo or single-family home is a better fit. VA loans can finance either type of property.

Using a VA Loan for a Condo – Step by Step

If you’ve determined a condo is right for you, here are the key steps to purchase one with a VA loan:

1. Get your Certificate of Eligibility. This shows lenders you qualify for VA loan benefits.

2. Check your credit and get pre-approved. This shows sellers you’re ready to move quickly.

3. Determine your budget. Factor in the mortgage payment, HOA fees, insurance, taxes, and other costs.

4. Find a VA approved condo. Search the VA database or use a lender’s lookup tool.

5. Make an offer and negotiate contract terms. Submit your offer and negotiate with the seller as needed.

6. Allow time for VA appraisal and condo review. It takes more time for condos to ensure HOA documents meet guidelines.

7. Close on time. Work closely with your lender to ensure all conditions are met for closing.

Then you can move into your new condo! It just takes a few extra steps compared to financing other types of homes with a VA loan.

FAQs about VA Loans for Condos

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