You are in the market for a new home and you think a condo is the right choice. If you use VA financing, you have to proceed carefully because you need to find a condo that has VA approval. If it does not, the association needs to secure VA approval or you cannot buy the condo with VA funding. The VA condo approval process can be lengthy, so starting as soon as possible will work to your benefit.
Why Do You Need an Approved Condo?
It might seem unfair that you have to purchase a condo with VA approval. If you qualify for the loan, shouldn’t you be able to buy what you want? The good news is the VA watches out for veterans. Just as they make sure a single family home is safe and sanitary, they want the same for a condo. If they let any condo pass through, they could put their veterans at risk. Condos are riskier because you do not own the whole property. Technically, all you own is the interior portion of the condo. The combination of you and all of the other owners own the outside walls and the common areas. If many co-owners default on their mortgage, your value could drop. In addition, it is up to the condo association to take care of the common areas. If the association is in financial trouble or does not properly care for the property, the value of your condo may drop. This puts the bank at risk, which is why the VA cares so much.
Find Out if the Development Has Approval
Before you discount the ability to purchase your dream condo, find out if it is approved by the VA already. You can search the Department of Veterans Affairs website to see if your condo already went through the process. If you know the name of the development, searching is simple. If you are not sure, you can search citywide or even statewide to find the project’s status. If the development does not have approval yet, you, your lender, or the association must initiate the process.
Starting the VA Condo Approval Process
Starting the VA condo approval process means gathering the necessary documents from the association. If the development never had approval, you must start from scratch. However, if they had an “approval with conditions,” you simply need to satisfy those conditions. Obviously, starting from scratch is the hardest. Here is a sample of what you need to provide to the VA:
- All plans and site maps for the development
- The Articles of Incorporation recorded with the county
- All condominium bylaws
- All development budgets and financial documents
- Copy of the declarations for the development
- Minutes from the last 2 HOA meetings
This is the basic list. The VA also needs confirmation that there are none of the following:
- Pending special assessments
- Outstanding litigation
- Work that is not yet complete
- Excessive amount of builder owned units
- No more than 50% of the units are rented
- More than 30% of the units remain unsold
- More than 15% of the current homeowners late on their assessments
Sending the Documents Into the VA
Once everything is together, someone must send the documents to your regional VA center. They will determine if the package is complete. If everything was provided, they forward it onto their attorney who determines the development’s eligibly. The best type of approval to receive is “approval without conditions.” This means you are free to secure VA financing and close on the purchase of your condo. If you receive any other type of approval, you may have to go back to the association and ask them to fix the problem. In some cases, such as is the case with pending litigation against the association, there is nothing you can do.
The good news is once a condo association obtains VA approval, it never expires. This means refinancing in the future will be easier for you. Other government-backed programs, such as the FHA program, require recertification of the development every few years. This can make it difficult for homeowners to refinance if the approval expired.
The sooner your lender or the association starts the VA condo approval process, the sooner you will know if you can follow through on your intent to purchase the condo!