VA Loans for Condos
Veterans and active service members who don’t want a traditional family home may be wondering if they can purchase condominium units with a VA loan.
The flexible nature of the VA home loan program allows for VA loans to be used to purchase condos. This popular option is ideal for retired couples or single, busy borrowers who don’t have the time or desire to care for an entire house. Condos can also be a less expensive option than purchasing a home.
However, buying a condo with a VA loan comes with a few different requirements when compared to purchasing a single-family property or multi-unit properties.
The first thing to note is that the VA has specific criteria that determines whether a property is a condo or another type of multi-unit property. This means that to get approved for a VA loan, you must find an approved development or apply to get it approved.
The VA lays out the requirements in the VA Lender’s Handbook that states condos must be defined as a structure or structures on, “common land, often including recreation amenities,” which is also typically owned by a homeowners association (HOA).
Yes, Veterans can use their VA home loan benefits to purchase a VA-approved condo. As long as you meet the general VA loan eligibility requirements, you should be able to purchase a condo.
However, since VA loans for condos are slightly different, the approval process differs from that of buying a single-family home. Lenders may also have additional requirements for condos specifically, so it’s worth speaking to them or a VA loan advisor for more information.
When applying for a VA loan to buy a condo unit, not only does the Veteran need to meet lender approval, but the condo development must do so as well.
The condo must be on the VA lender's approved list of condominiums. However, if a condo isn’t yet approved, that doesn’t mean the property is out of reach. You can apply to get the condo approved, a process which usually takes about 30 days.
Similar to a single-family loan, the condo must meet minimum property requirements for VA loan approval to ensure that the condo is safe, sanitary and secure. This requires an appraisal to assess the property. There are also additional condo-specific requirements that must be met and include the following:
HOA dues are often necessary for condos owners. This is especially the case if the complex has lots of additional amenities such as a pool or gym. To be approved to use a VA loan for a condo in a complex, less than 15% of the unit owners must be behind on their HOA dues.
The property cannot be included on the VA’s approved list of condos if the owner’s association bylaws include a clause called “right of first refusal.” This clause gives the homeowners association or condo association the option to buy or lease an individual unit before the sale is approved for an outside buyer. Currently, the VA will not approve condo projects that have the right of first refusal clause in their paperwork.
To be considered suitable for a VA loan, the condo complex must have more than one unit. For newly constructed condos, at least 75% of the units must be sold to buyers, rather than rented to tenants.
No single entity or individuals can own more than 10% of the units in the development. That goes for any individual, investor or private company.
Furthermore, at least 50% of the units must be occupied by their owners. Complexes with low owner-occupancy rates, or a significant number of empty units, might raise red flags with the VA. Occupancy requirements ensure that the condos units are compliant with fair housing and lending laws. In addition, they protect the Veteran, while making sure nothing impacts the future marketability of the property.
While it is possible to obtain a VA loan to buy a condo unit, it's important to keep in mind the many requirements involved with it. To get the VA loan process started or to learn more about VA loans for condos, the first step is to see if you qualify. Speak to one of our specialists today to learn more about your options.
