Thinking of joining the condominium lifestyle? Are you eligible for a VA home loan and want to know if you can use a VA loan to buy and finance a condo? Why do people decide to buy a condominium unit instead of a single family home anyway?
Those are three excellent questions to ask if you’re thinking of buying a condo and are also one of those who have earned the VA home loan benefit.
There are several reasons why someone would choose a condo over another type of property. Perhaps one of the main reasons is the lack of maintenance required. When you buy a home and have a yard and a garden and a fence those items and others will require some attention. You’ll need to mow your lawn and keep it clean. If you have a garden and enjoy working it it’s still something that demands your attention. Fences, decks and storage units will also require some regular maintenance. When you live in a condo, the maintenance is taken managed by the homeowner’s association who hire maintenance personnel to take care of the landscaping, walkways and common areas. The only maintenance a condo owner needs is the interior space of the unit, everything else is already taken care of.
In addition, owning a condo can be much less expensive compared to a similar-sized single family home on a lot. If someone guys a penthouse with a 360 degree view overlooking the ocean then yes that will command a higher price but overall the price per square foot for a condo will be lower than a detached single family dwelling.
However, unlike a detached single family dwelling, the entire condominium project must be approved by the VA prior to financing any individual unit. If the VA has approved the project then using your VA home loan is an excellent choice but if it’s not approved then it can take two or three months at least to start the VA approval process.
VA Approved: The Approval Process
When the VA approves a condo it does so to make sure the project is in good physical and financial shape. It does so by reviewing different documents supplied by the homeowners association. Such a review includes documents including:
• A review of the CC&Rs, or Covenants, Conditions and Restrictions
• If the homeowner’s association is incorporated, a copy of incorporation papers
• HOA budget
• HOA meeting minutes
• Condo plans and specs
These documents among others are delivered to the VA approval department along with a small fee for the project to be approved.
If a project is not approved and your escrow period is 30 days it’s not very likely the project will be approved in time to make your closing. It doesn’t matter about anyone’s credit score, income or employment, if the project is not approved there can be no closing. This is for an existing project. If the condominium project is under construction then additional paperwork is required and no financing can be completed until construction has finished. In addition to the documents listed the VA also asks that
• At least 50% of the units must be owner occupied
• There can be no more than 15% of the owners that are more than 30 days delinquent with their dues
• For new construction at least 75% of the units must be pre-sold
All of this seems like a lot of work but most developers begin the condo approval process with the VA early on during construction. When a project has received VA approval, the VA places that unit in a database. If the project is in fact listed as approved that’s all that is required, there is no longer any need to submit documents to the VA when buying a condo and using your VA loan.
This is something that you and your agent should do ahead of time before you decide to make an offer on a condo. The VA approved list asks that you enter the condominium project name, city and state. If the project is approved, the VA will report that the approval status is, “Accepted Without Conditions.” If the site does report the project is approved, your approval at the mortgage company will proceed just as with any type of mortgage.
Your lender will accept your loan application and begin the approval process. If you don’t have a copy of your certificate of eligibility, your loan officer can request that for you. This certificate is the only document lenders can use to validate your VA loan eligibility and while you can request that document on your own directly from the VA note that the process can take several weeks by mail or in person. You can go online to request a copy from the VA but the lender can get your certificate in a matter of seconds as long as the lender is approved to do so by the VA.
If you’re thinking of a condo and are eligible for a VA home loan just remember the first thing you and your agent need to do is to make sure the project has been previously approved without conditions. If so, you’re well on your way to your very own condo.
Thank you, Chad. You have been amazingly responsive to all my questions, and you have a great staff assisting you. Thanks so much for all your help!
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”
“We’re loving our new place and we’re very pleased with how smoothly everything went through closing. Thanks for keeping us up to date on the possibility of refinancing at a lower rate; we trust your judgement as far as waiting until the rate is around 5% lower before we refinance. We’re very interested in pursuing that if rates drop to that level. Thanks so much for all your help and personal attention!”