Purchasing a condo is a great choice for anyone who's retiring, and this includes military veterans as well — you don't have to worry about landscaping or maintaining the common areas in the complex, which makes living in a condo simpler than living in a townhouse or single-family home. The VA home loan program offers low mortgage interest rates to veterans, and it can be used to purchase a condo as well.
However, unlike with other forms of housing, there are some stipulations that the VA requires before it will allow you to use its home loan program to buy a condo. Condos need to be VA-approved beforehand. If you are interested in purchasing a condo using your VA loan, read on to find out more about what approval entails and what you can do if your dream condo isn't already approved.
Why Does the VA Need to Approve Condos?
The VA acts as the guarantor for its home loan program, so it wants to ensure that homes are up to its standards.
If you're currently looking for a condo, the VA maintains a searchable database of all condominium complexes that it has already approved. Buying a condo that's been VA-approved means you and your lender don't have to do any extra work, so it makes the process much simpler.
When the condo you want to purchase isn't on the list, however, you'll need to ask the VA to approve it before you can use the VA loan program. The VA will review the covenants, conditions, and restrictions placed on condo owners along with the homeowners associations' bylaws.
What Does the VA Look for When They Approve Condos?
The first criteria is that at least half the units in the complex need to be occupied by their owners. In addition, at least 75% of the current residents need to be current on their HOA dues. If these conditions aren't met, then it's a likely sign that the condominium complex isn't a healthy one, and the VA won't approve it.
Secondly, the VA will not approve condos when the homeowners association has the right of first refusal on condo sales. The right of first refusal means that the homeowners complex is granted the opportunity to purchase any units that are put up for sale within the complex before any other buyers are considered.
The reason why this is a problem for the VA is that as the guarantor of your mortgage, they'll purchase your condo if you default — there can't be any impediment between them and purchasing your condo. The right of first refusal puts a barrier between the VA and your condo.
Thirdly, the homeowners association cannot bar condos from being rented out, and they can't require that renters be approved by the members of the homeowners association before they're able to rent a unit. If you default and the VA buys your condo, they'll immediately rent it out in order to recoup some of their losses. They need to be able to do this freely without having the homeowners association intervene.
If the homeowners association does not have the right of first refusal and has no restriction on renting, then it's likely that the VA will approve the condo.
What Should You Do If the Homeowners Association's Bylaws Aren't Agreeable to the VA?
In this situation, the only thing you can do is contact the homeowners association and ask them to change their restrictions. The easiest way for them to become VA-approved is to vote to create a special exemption for condos bought under the VA home loan process. If they don't want to change their bylaws, then you'll have to search for another condo to purchase.
Ultimately, if you want to purchase a condo using the VA loan program, it's best to get started by contacting a VA-approved lender. If you've found a condo that you want to purchase that hasn't been approved by the VA, they can help you obtain all of the documentation that the VA requires in order to approve it. While the approval process can take over a month, it's usually successful as long as the homeowners association isn't overly restrictive.