Mortgages supported by the Department of Veterans Affairs, commonly called “VA loans,” are some of the most beneficial for homebuyers. They have fairly light qualification standards, and they are easily one of, if not the, most affordable mortgages when it come to upfront costs.
VA loans are often considered primarily as an option for single-family homes, but they can be used for more than just a nice house on a green piece of suburban property. These loans can also be used to purchase a multiunit property (up to four units), a townhouse, and even a condo.
The process for purchasing a condo, however, requires approval of the property itself. VA condo approval, while fairly straightforward, often causes the rejection of a loan. However, by working with an experienced mortgage professional, there is a strong chance that your loan will be approved.
VA Condo Approval: Not as Complicated as You May Think
Borrowers who intend to use a VA loan to purchase a mortgage have to have the property approved by the VA. Even if there are no shared walls, a condo has to be approved by the VA in order to be eligible. Essentially, borrowers will need to search for condos that meet the VA’s guidelines.
Condominium facilities are usually pre-approved by the VA; this approval is saved for future use. Having approved condos on an existing list speeds the process for having a loan approved. But not all buildings or units are on the list. For a variety of reasons, the condo you are considering for purchase may have been left off. You may assume that the deal is off. After all, if a condo has not been approved, you can’t use a VA loan…right?
Essentially, you have three options if the condo you want to purchase has not been approved. First, you can simply move on to another condo, one that has already been approved by the VA. This is a convenient option, but you may not find another condo that fits all your needs.
Second, you can try to find a different loan product. There are other options for financing, but you likely won’t find something with all the benefits of a VA loan, especially a loan that requires no downpayment.
Third, you can work with a lending professional and go through the process of trying to get the facility approved. For many, this is the best option.
There is actually a process that allows you to apply for VA condo approval, and it’s actually much more simplified than you may have assumed.
In this case, you can work with a VA-approved lender to have a condo approved.
Requirements for Having a Condo Approved
The VA includes a variety of requirements for having a condo facility approved. Understanding what the VA looks for, and what would disqualify a condo unit, will help when searching for a property.
One of the main requirements is owner occupancy. The VA wants to see that a high number of condo units in a facility are lived in by the unit’s owners, as this generally brings better financial stability to the entire complex. Owner occupied requirements for VA loans is 50%. In other words, as long as 50% of the units, or more, are lived in by the owners, the condo should pass this qualification standard. The other half of the units can be rented out, but rentals cannot make more than 50%.
There are also requirements for dues. If more than 15% of the unit owners are behind on HOA dues, the entire facility is ineligible. If a project has been recently constructed, at least 75% of the units must be sold before it is eligible for VA financing.
The VA also likes to see a diverse collection of ownership; they prefer that one group or individual does not have too much of an ownership stake. If a single entity, be it an individual, investor, or corporation, owns more than 10% of the units, the condos in that facility are not able to secure VA loans.
Why are Condos Typically Denied VA Approval?
The approval process, we admit, has many factors. Too much ownership from one group, too many owners with delinquent HOA dues, not enough units purchased yet; all of these can create issues with the VA.
However, there are a few common reasons why a condo project is rejected. Certain issues, conditions, or restrictions can create a red flag and reduce the chances of getting a development approved.
One of the most common reasons for denial is when a condo community has bylaws that prevent the sale or foreclosure without HOA approval. This severely limits what an owner can do with their condo, and creates issues for lenders. If there is anything that prevents the owner from freely selling their property, it’s likely that the unit will not get VA condo approval.
The Approval Process is Simple
The VA provides a clear list of procedures for having a condo project approved if it is not already on the list. Working with a lending professional, you can submit documents and information to have the condo approved.
A condo’s organizational files may include a variety of information. This could include bylaws for the homeowner’s association (HOA), which impact the finances of residents, as well as financial statements from the HOA. The list of required information could also include minutes from recent HOA meetings, special assessments, any notes on litigation, and more.
Altogether, the process is surprisingly simple and easy. Borrowers who work with an experienced lending professional, especially one who has worked with the VA condo approval process, are more likely to have their unit of choice approved while creating a simple path to an affordable VA loan.
Is Your Condo is Not Approved?
If you are having problems with VA condo approval, contact our team right away. We can take a detailed look at your application, as well as the condo you are trying to buy, and use our experience and knowledge to find a mortgage that fits your needs. This could include helping with condo approval, or helping you select a different loan that would help you purchase the property you desire.
We understand the VA condo approval process, so contact our staff and let us help with you application today!