Buying a Condo With a VA Loan

The main rule

A VA loan can be used to buy a condo, but the condo project must be on VA's approved list. VA reviews the project's legal documents, such as the bylaws and declaration, to make sure they do not put Veterans at unfair risk. This is different from FHA, which has its own separate approval list. A condo can be approved for one and not the other.

Finding approved condos

VA keeps a condo report you can search online through its loan system. You can search by state, city, name or ID number. Each listing shows whether the project is accepted, pending, or has issues. Ask your lender or agent to check the list before you make an offer. It saves a lot of time.

If the condo is not on the list

Many condos have simply never been submitted. A lender, the homeowners association (HOA), a builder or another party can send the project documents to VA for review. Commonly needed documents include:

• The recorded declaration or master deed
• The bylaws and any amendments
• Articles of incorporation for the HOA
• Rules about leasing, right of first refusal and how units can be sold

VA reviews these for things like unfair restrictions on selling or renting your unit. Approval can take a few weeks, so build that time into your contract if possible.

What VA looks at

VA mainly reviews the legal documents, not the project's finances in deep detail like some other programs. It looks for problems such as:

• Rules that unfairly limit your right to sell, lease or transfer your unit
• Rights of first refusal that could block a sale
• Unusual liens or rules that could hurt the lender's position

Your lender may still ask about the HOA's budget, insurance and any lawsuits. Those are often lender overlays.

Costs to plan for

• HOA dues are part of your monthly housing cost. They count in your DTI and residual income math.
• Special assessments can come up for big repairs. Ask whether any are planned.
• Insurance: the HOA's master policy covers the building; you may need your own "walls-in" policy.

Step by step: buying a VA condo

1. Get your COE and preapproval, and tell your lender you are looking at condos.
2. Search the VA condo list for the projects you like.
3. If it is approved, make your offer as usual with the VA escape clause.
4. If it is not, ask your lender whether it can request approval and how long it will take. Add time to your contract.
5. Order the VA appraisal. The appraiser will look at the unit and the common areas that affect it.
6. Get HOA documents such as the budget, rules and insurance certificate.
7. Close once the project approval, appraisal and underwriting are complete.

Tips

• Ask the HOA if any other VA buyers have closed there recently. That is a good sign.
• New condo projects may need extra steps. Builders often handle the approval.
• Read the leasing rules. If you may PCS later and want to rent the unit, make sure the HOA allows it.

Bottom line

Condos can be a great fit for a VA buyer who wants less upkeep. Check the VA condo list early, and if the project is not on it, start the approval request as soon as you know you want to buy there.