Buy Condo Unit With VA Mortgage Loan

How to Buy a Condo Unit with a VA Mortgage Loan

Marcus Marion, CMA™ 1 month ago 0 17

Many military members and veterans eligible for VA loans want to know if they can buy a condo with a VA-backed mortgage loan. 

The short answer is yes. This program allows you to purchase various property types, from regular detached homes to condos to duplexes. 

When purchasing a condo, you must make sure the project is already approved by the Department of Veterans Affairs. 

Acceptable Property Types for a VA Loan 

With a VA loan, eligible borrowers can buy a house or condo with no down payment and no mortgage insurance. 

In this context, “eligible borrowers” include military members and veterans. This program is for current and former military members and certain surviving spouses. 

The program is managed by the Department of Veterans Affairs (VA). The VA permits financing for various types of homes, including individual condo units, recognizing the diversity in available properties for home buyers. 

Eligible borrowers can use a VA-guaranteed purchase loan to: 
  • Buy a single-family home, townhouse, or multi-family up to 4 units 
  • Buy a condo in a VA-approved project 
  • Buy a home and improve it 
  • Buy a manufactured home and lot 
  • Build a new home 

As you can see, home buyers have various options for using a VA loan. However, some additional restrictions may apply if you are buying a condo. So, let’s talk about those rules next… 

VA Loan Property Requirements

When purchasing a condo with a VA loan, specific VA loan property requirements must be met to ensure compliance with VA regulations: 

  • VA-Approved Condo Project: The condominium project must be on the VA’s approved list. This ensures that the entire development meets the VA’s financing standards. 
  • Occupancy: The condo must serve as the borrower’s primary residence. Vacation homes or investment properties typically do not qualify for VA loans. 
  • Financial Stability: The condo association must demonstrate financial stability, including adequate reserve funds and timely payment of dues. 
  • Compliance with State and Local Regulations: The condo project must comply with all state and local regulations governing condominium developments. 

Condos Must Be Part of an Approved Project 

Eligible borrowers can use a VA home loan to buy a condo if it’s on the approved condo list maintained by the U.S. Department of Veterans Affairs. 

This is an essential distinction from buying a regular single-family detached home. Regular homes do not need to be pre-approved by the VA (though they need to pass an appraisal to qualify). 

However, different rules apply to condo units. The entire condominium project must have been previously approved to qualify for VA mortgage financing. 

VA Condo Requirements 

Condo For Your Family

In addition to being on the VA-approved list, condos must meet several specific requirements to qualify for VA financing.  

These requirements are designed to protect the interests of veterans and ensure the stability of their investment.  

Key requirements include: 
  • A minimum percentage of units must be owner-occupied. 
  • The condo association must demonstrate financial stability. 
  • The delinquency rate of condo association dues should not exceed VA thresholds. 
  • The condo project must have adequate insurance to protect the property and its residents. 
  • The project must comply with all state and local regulations governing condominium developments. 

In its official mortgage guide for home buyers, the Department of Veterans Affairs states: 

“VA maintains a list of approved condos. If the condo is not on the list, the project must be submitted to VA for review to ensure that it complies with VA requirements.” 

Here’s how to check for VA approved condos in your area: 
  1. Visit the following URL: https://lgy.va.gov/lgyhub/condo-report 
  1. Check the box that says “retrieve only approved condos.” 
  1. Enter the state (required) along with the city or county (optional) 
  1. Click the “enter” or “submit” button to process your request 

You’ll then be presented with a list of condos in your chosen area that have been approved by the Department of Veterans Affairs. You could potentially buy any VA condominium unit on the list with a VA loan. 

There’s also a process in place for when a buyer wants to purchase a condo that’s not currently on the approved list. A mortgage lender can ask for a review and possible approval by creating an electronic record for the condo with supporting documents. 

Recommended Steps for Buyers 

VA Loan Requirements For Condo

If you are planning to buy a condo with a VA-guaranteed mortgage loan, there are certain steps you will need to take to get the ball moving. While this process can vary slightly from one borrower to the next, it usually works like this: 

  1. Review the minimum eligibility VA loan requirements 
  1. Obtain your Certificate of Eligibility (COE) directly from the VA 
  1. Get pre-approved by a lender to determine your maximum loan amount 
  1. Verify the condo is part of an approved development, as explained above 
  1. Research the condo’s bylaws, association dues, and special assessments 
  1. Make an offer, negotiate the price, and sign a purchase agreement 
  1. Wait for the condo to be appraised by a VA-approved appraiser 
  1. Wait for the mortgage underwriting process to be completed 
  1. Attend closing to sign all finalized documents and pay your closing costs 

As part of your preparation for buying a condo with a VA-guaranteed mortgage loan, utilize the VA condo lookup tool to confirm if the condominium project is on the VA’s approved list. This step is crucial in ensuring a smooth and efficient home-buying process.  

By verifying the condo’s status beforehand, you can proceed with confidence, knowing that your potential purchase aligns with VA requirements. This tool makes it easy to find out if a condo is eligible for a VA loan. It helps simplify your path to homeownership. 

Home inspections are optional for VA loans. However, the Department of Veterans Affairs encourages buyers to have a thorough property inspection to determine the true condition of the property. 

(The VA-required home appraisal mentioned above has a basic inspection component built into it, but it’s not a comprehensive home inspection.) 

For the most part, the process of buying a condo with a VA loan is similar to purchasing a regular detached single-family home. The main difference has to do with the approval list mentioned above. 

VA Condo Approval Process  

VA Condo Approval Process

The VA condo approval process ensures projects meet the VA’s requirements for mortgage loans. 

In the VA condo approval process: 

  • Submission: The condo association or developer submits the condominium project for review to the VA. 
  • Evaluation: The VA looks at different things like how many units are lived in by owners, if the condo association is financially stable, and if they follow state and local rules, plus if they have insurance. 
  • Approval: If the condo project meets all VA rules, it gets put on the VA’s approved list. This shows it can get VA financing. 
  • Simplified Financing: VA-approved projects make buying homes easier for borrowers. They don’t need to review each unit separately, which helps make financing smoother. 
  • Request for Review: If a project isn’t approved at first, the lender or condo association can ask the VA to review it again. They can fix any problems found during the first look. 

The VA condo approval checklist ensures that all documents and rules are followed in a standard way. This checklist covers critical areas such as financial health and owner-occupancy rates.   

It ultimately facilitates a smoother path to approval and financing for condo projects by ensuring regulatory adherence. 

No Down Payment and No Closing Costs 

As you can see, there are many steps you need to take in order to purchase a condo with a VA-backed mortgage loan. However, this program provides many benefits as well. 

Borrowers who use conventional mortgage loans to buy condos typically have to make a down payment of at least 3%, and sometimes more. Additionally, they often have to pay for mortgage insurance if they make a down payment below 20%. 

In contrast, the VA loan program allows you to buy a condo with no down payment and without any form of mortgage insurance. These benefits often remove the biggest hurdle to homeownership: the upfront expense! 

Moreover, borrowers typically pay a VA funding fee with a VA loan. However, you can roll this fee into the loan amount, minimizing out-of-pocket expenses at closing. 

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