Using a VA Loan to Buy a Condo

Buying a condominium with a VA loan can be an excellent path to homeownership for Veterans, service members and their families. Condos often come with less maintenance, shared amenities and prime locations that make them an appealing option for many buyers.

However, purchasing a condo with a VA loan comes with a few extra steps compared to buying a single-family home or multi-unit property. Let’s take a closer look.

Borrowers can ask their lender to seek approval from the VA for the condo development they want. The lender must make a written request for approval and include a copy of the condo's organizational documents. To help move things along, borrowers can share contact information for the condo’s president, treasurer or another board member so the lender can easily get the paperwork needed for approval.

These may include:

• Declaration of covenants, conditions and restrictions
• Homeowner association bylaws and budget
• Plat, map or air lot survey
• Special assessments and litigation statement
• Minutes of the last two homeowner association meetings
• Current financial and litigation statements

It's important to note that condo developments are not obligated to provide this documentation to you or your lender.

VA Condo Requirements

The VA doesn't publish its guidelines on condo approval conditions, but Minimum Property Requirements play a major role. Also, lenders may have their own requirements, known as VA lender overlays, on top of what the VA wants to see.

Here are a few VA condo requirements buyers may encounter:

• Owner-occupancy: VA appraisers could flag a development if owner-occupancy rates fall under 50% for the entire development.
• Vacancy rates: New developments might need a certain percentage of units sold or under contract. Generally, this is at least 75%.
• HOA dues: There might be a cap on what percentage of units can be behind on their HOA payments

VA Condo Approval Types

The VA has different approval statuses depending on the condition of the condo complex and whether or not it meets the requirements. Let’s take a look at each approval status and next steps:

Accepted Without Conditions

This approval status means the condo development is fully approved, and you may proceed as if buying a single-family home. The unit is eligible for a VA loan with no additional steps or requirements.

Accepted With Conditions

Your condo complex is approved, but the VA has concerns about at least one aspect of the application. For example, the owner occupancy rate may be nearly 50%. This doesn’t halt your VA loan purchase, but you may need to complete additional paperwork stating you understand the conditions.

HUD Accepted

Previously, the VA accepted any FHA-approved condo project by the Department of Housing and Urban Development (HUD). This is no longer the case, but older complexes that earned HUD approval prior to December 2009 may still qualify for a VA loan.

Unaccepted

Condo units in developments that are “unaccepted” are not eligible for VA financing. These projects were either denied or have never gone through the VA condo approval process. In this case, it’s best to look for an approved condo development or another VA-eligible property.

One-Time VA Condo Waiver

If the VA has previously denied approval for a condo development, there’s still a path forward through what’s called a one-time VA condo waiver.

The waiver can be used once per Veteran’s lifetime, not once per condo association. That means while multiple Veterans can each use their benefit to buy a condo in a denied development, an individual Veteran can only use this waiver one time.

To qualify for a one-time va condo waiver, the VA must have reviewed and denied the condo association within the past year. If the development has never been reviewed or it’s been more than a year since the last review, the lender will need to start by requesting VA approval for the condo before a waiver can be considered.

Because of the extra steps involved, the process typically adds one to three weeks to the standard condo approval timeline. But a denial doesn’t always mean the end of the road. With the right guidance, many Veterans have successfully purchased condos in developments that were previously denied by the VA.

Legal and Occupancy Concerns for VA Condos

The VA also encourages lenders to include an attorney's opinion letter stating that the condo development meets VA requirements.

The VA will want to ensure the condo development doesn't put any undue burden or restrictions on Veterans or lenders. One example is if the development has rules that prevent foreclosure or property resale without the homeowners association's approval. Deed restrictions like that will typically be a problem.

Communities with age restrictions can also be challenging. With something like an "over 55" development, for example, lenders and the VA will need to examine the community's organization documents. Lenders want to ensure these communities are compliant with fair housing and lending laws and don't impact the property's future marketability.

Unit occupancy can also come under scrutiny. When a development is first under consideration for VA condo approval, lenders may require that a certain percentage of the condo units be either sold or under contract.

The same may apply to developments already approved by other government agencies, which can still face additional VA review.

Connect with a Veterans United VA loan expert or call at 855-870-8845 if you have questions about buying a condo with your hard-earned VA loan benefits.