Buying a condo may be the smartest financial choice for you right now. You know that you can’t handle the maintenance involved with a single-family home and the condos in your area are less expensive than most single-family homes. What happens if you are a veteran, though? Can you get VA financing on condos?
Luckily, the answer is yes, but it does depend on the condo development. Unlike single-family homes, you can’t just go buy a condo and assume you can use VA financing on it. You have to see if the development has VA approval first.
Condos on the VA Approved List
If you are lucky enough to find a condo development that is already on the VA approved list, you don’t have to do much more than that. You can move forward with the loan process as you would with any other home.
You can see if a development you are interested in is already approved here.
Condos Not on the Approved List
If you find a condo that you love that isn’t on the list, you have to get it approved. Actually, it’s not you that has to get it approved, but your lender will. The lender will have to write a letter to the VA to seek approval. They will also have to include a variety of documents from the condo association including:
- The association’s bylaws
- Any declaration of covenants
- Map of the development or survey
- Any proof of pending litigation
- Homeowner’s insurance meeting minutes for the last two meetings
- Financial documents for the association
The lender should also consider including an Attorney Opinion Letter. This is optional, but it can help your case. The letter should state that the attorney believes that the development meets the VA’s guidelines to the best of his knowledge, if he feels that way.
The Reason for the VA Approval
It might seem strange that the VA needs to approve the development, but it’s meant to protect veterans and the lenders. For example, some associations have in their documents that foreclosure of a unit cannot take place unless it’s approved by the association. This could put a VA lender under tremendous stress. If the borrower isn’t making the payments and enough time has passed, foreclosure must take place. If the association won’t allow it, the lender is stuck with a non-fulfilled mortgage and they can’t have access to the collateral that was put up for the home.
Another issue commonly found is age restrictions on the condos. For example, areas that are for the elderly only limit the marketability of the condo. If the veteran wants to sell it in the future, the market for the home may be tremendously decreased.
One final issue is the occupancy of the units. If there’s one owner that owns a majority of the units and he runs it as a condo/hotel, it can decrease the value of the property for you. This could make it difficult for you to sell the property in the future too.
Luckily, the VA approval process doesn’t take too long, assuming that you provide the necessary documentation. The process can take months if you don’t provide the necessary documentation right away. It can also take months if the development itself is in no rush to secure VA approval. You cannot close on a VA loan until the development is on the VA-approved list, though, so it’s worth the time and effort t it takes to get it on the list. In some cases, the VA may approve a unit if it’s on the FHA or USDA approved list, but you’ll still have to check with the VA to make sure.