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First Time Home Buyer Programs | Home Loans | Refinance

Buying a Condo with VA Financing

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Many veterans opt for purchasing a condo when they first use their VA benefits because of the convenience and affordability of this type of housing. Condos often have more benefits for those just starting out and luckily enough, the VA offers the same benefits on condos as it does single family houses. This gives veterans even more options when they are ready to purchase a home. The issue that occurs when you buy a condo with VA financing, however, is the need to find a development that has VA approval or that can obtain it quick enough to complete your loan approval. The VA does have a list of currently approved developments or you could encourage a development to secure approval so that you can purchase a unit there.

What is VA Loan Condo Eligibility?

If you plan to purchase a condo with your VA benefits, you must choose one that the VA considers eligible. The VA has a say in whether an association obtains eligibility because of the risk the VA has in guaranteeing the funds you use to purchase the condo. You do not own the entire development; you only own the interior components of your condo as well as a portion of the shared areas of the development. This puts the lender and the VA at risk. If the VA allowed funding on any condo, they would stand to lose a lot more money because of the many risk factors they would expose themselves to. This includes things like a large number of foreclosures, numerous condo owners late on their association dues, or pending litigation against the association. Each of these issues could impact the value of the individual condos in a negative manner, putting the VA and the lender at risk of default. It is for this reason that VA loan condo eligibility is a necessity.

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How Long Does it Take to Get VA Approved?

The timeline to get VA approved is rather short, depending on the workload of the VA and how complete the association’s package is that they send to the VA. Typically, the VA can provide approval within 30-45 days, but you should count on up to 90 days for approval in the event that there are any issues that come up.

What Does the VA Require for VA Condo Approval?

There are 7 basic documents the VA requires for VA condo approval, each of which are a part of the development’s standard operating documents. These documents include:

  • The association’s bylaws
  • The Articles of Incorporation for the association
  • The Declaration of Covenants, Restrictions and Conditions
  • The budget for the association
  • The management agreement for the association
  • The minutes from the last 2 homeowner’s association meetings
  • Any amendments recorded in the county
  • Plat map
  • Condominium plans

In addition to the above documents, the VA requires a written request to secure VA approval and an attorney opinion letter; however, this part is optional. The VA recommends it in the event that the association has never held any type of HUD approval in the past.

In order to obtain approval, the condo association must meet the following requirements:

  • At least 50% of the units must be owner occupied (no more than 50% can be rented)
  • 85% of the condo owners must be on time with their homeowner’s association dues
  • 70% of any units in a new development must be sold

VA Condo Approval Status – What to Expect

The VA provides approval with different wording that means different things. For example, you might receive an approval, but it has conditions that coincide with it. If you search in the VA database for approved condos, you will see which developments are “accepted without conditions” and those that have conditions. Understanding the different terms will help you know what to do next:

  • Accepted without conditions – This is the ultimate approval you want to see from the VA because it means that anyone with VA benefits can secure VA funding on a condo in this development
  • HUD accepted – Condos that fall into this category are in a grey area. It means that they have some type of HUD approval, but it might not be VA approval specifically. Prior to 2009, any condo development that had FHA approval automatically gained VA approval. Today this is not the case. You must secure VA approval separately from FHA approval. If a condo says HUD accepted in the system, the loan officer should inquire if this means VA approval or not. If it does not, the approval will not likely take that long since it is HUD approved.
  • Unaccepted – This is the only category that renders any condo in the development ineligible for VA financing.

What are the VA Presale Requirements?

If you plan to purchase a condo in a development that is still under construction, you have to wait until 70% of the condos are sold. This could include your own contract, as the VA only requires that a bona fide contract be executed by those intending to purchase in order to count towards the 70%. If 70% of the units are not yet sold, you will not be able to obtain VA approval.

Does VA Approval Expire?

Unlike FHA condo approval, VA condo approval does not expire. This means once the development obtains approval, it is good for the life of the development. You are able to tell if a development has approval by searching the VA website.

Generally, the homeowner’s association that runs the condo development applies for VA approval. If the HOA does not apply for it, the lender providing your loan can apply for it after obtaining the proper paperwork from the HOA. The process is rather simple to start, however, the VA might ask for more information than the above documents depending on what the above required paperwork says.

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