Buying a Condo with a VA Loan

If you are a veteran with VA benefits, you may want to buy a condo with your VA loan. Condos are often great starter homes or homes for those that don’t have time for exterior maintenance or that don’t need a lot of space.

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Can you use your VA loan benefit to buy a condo? Keep reading to find out more.

The VA Approval

The largest obstacle you’ll face when you want to buy a condo with VA financing is finding an approved association. The VA puts the association/development through a rigorous process in order to approve them for VA financing. If the VA finds anything wrong with an association and the way it’s run, they won’t approve the development. This means no one can use VA financing to buy a condo in the development.

The VA looks at a variety of factors when looking at the association. A few of them include:

  • The association’s’ budget
  • The number of completed units in the development
  • The number of sold units in the development
  • The number of investment-owned units in the development
  • The number of unit owners that are behind on their association dues

Basically, the VA wants to make sure that you are making a good investment. They also want to reduce their risk of default. If you find that you bought a condo that is in a bad development and you didn’t put any money down on the home, it could be easy for you to walk away from it and let the loan go into foreclosure. That’s what the VA tries to avoid.

Buying a Not Yet Approved Condo

Many existing condo developments already have VA approval. If they don’t, you may be able to get it approved by going through your lender. There’s one exception, though. If you want to buy a condo that has a ‘denied’ status from the VA, you won’t be able to get it approved. The denied status means the VA already decided that the development is not a good risk.

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If your development is new or just hasn’t gone through the VA approval process yet, you may have options. Your best bet is to find a condo development that HUD-approved already. Developments that HUD-approved usually have an easier time in the approval process.

You’ll have to go through the association to ask them to get VA approval. This is up to the discretion of the association, though. They aren’t under any type of obligation to do so. Obviously, if they want to market their units to veterans it works to their advantage, but some associations just don’t want to be bothered – it’s a 50/50 shot.

A part of the process that is crucial to its success is securing the Attorney Opinion Letter. If you can suggest to the association that they get one, it will work to their advantage. This letter is just a statement from an attorney that tells the VA that the association is a good one and deserves VA approval. These letters often go a long way with the VA.

The VA condo approval process can seem cruel or just as an obstacle to get VA financing, but it’s meant to protect you. Of course, it’ protects the lender/VA too. It helps protect you from buying a condo that could be a bad investment. The VA wants to know that the development is open to everyone and that one investor isn’t using it as a condotel or just renting it out to tenants throughout the year. You’ll find a development that is better cared for when you have full-time primary residents living in the units.

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Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.

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