Condos are a great choice if you’re looking for a home to put your VA loan into. Economical, comfortable, and usually no more than a short walk to the nearest grocery store. But… not every condominium is going to be approved by the VA loan program.
Where Do You Start?
Your condo might already be on the pre-approved list. You can check for yourself on the government website. If you haven’t already selected a condo, we’d recommend using the list on the website as a starting point for your house-hunt.
A project that is not on that list may not be on it for a reason. It could have been submitted, already, and rejected for one reason or another. If you find your project on that list, then the hard part is over and you can get started with the financing project.
If not, you have two choices. You can either select a similar project from that list (you may even find a place that you like even better), or you can put your papers through the approval process.
Should You Seek Approval?
More often than not, the approval process wraps up in about a month’s time, although it can take up to ninety days and there’s a fee of $850. For some, this just isn’t worth the hassle, and it’s easier to pick a project off of the pre-approved list, which is precisely what we would recommend if you don’t already have a condo that you’ve really got your heart set on.
But if you’ve found the perfect condominium, or if it’s the only condo project available where you want to live, then the cost may be well worth it. Another $850 is probably not going to make or break your house-hunting budget, after all. The exceptions here would be if, for some reason, you can’t wait thirty, forty five, ninety days to move in. If you’re looking for a place right now and you’re not willing to sign a month-to-month lease while waiting for the VA to approve or decline your condo project, then it may be best to look for housing elsewhere.
This would, of course, be a rare circumstance. We spend our lives hunting for our dream homes, what’s another couple months?
Getting the Papers Together
If you’ve decided that this is definitely the condo project for you, and you’re willing to pay the fee and wait a month for approval, then here’s what you’re going to need for your application package:
- CC&R, also known as Declarations or Master Deed
- Signed bylaws for Home Owners Association
- Articles of incorporation for the HOA
- Management agreement
- Statement of income and a balance sheet showing your financial income and expenses
- Transcript of the last 2 HOA meetings
- Recorded amendments for annexation
- Map or air lot survey
- Condo plans
- HOA budget
Any documents that you cannot obtain from the condo project, you can usually get a hold of through your VA lender or agent. This is a lot of files to get together, and the whole point of the VA loans program is to make the whole process a little easier. Sometimes that means doing the legwork for you and fetching the papers that you need in order to get the loan that you’re after.
A letter from an attorney can help to speed the whole process up, but can also bump your fee totals up to $1500. Worth it for some, not for others.
From here, you’ll want to go to the VA website and contact them for further instructions on sending in your application package.
What is the VA Looking for?
The approval process looks at a number of factors, but one of the key pieces they’re considering is whether or not the HOA and the management allow condo owners to rent their homes out to tenants.
The reasoning being that, if a veteran is set for redeployment, then they want to ensure that the veteran has the option to recoup the costs of condo ownership, not only their lease, but HOA fees and so on.
Unfortunately, this ruling applies even if you are a retired veteran who will never see active duty again. Getting the condo approved means having it added to the list of approved condo projects. This means that the VA has to consider not only your needs, but the needs of every veteran looking for a home within a condominium community.
You can, of course, potentially save yourself eight hundred fifty dollars and a lot of paperwork by finding out for yourself whether or not the condo will allow you to rent your home out. Even if you don’t plan on ever renting your home out, this is a question you will need to ask because it will determine whether or not there’s a chance of having the project approved by the VA. If the answer is no, then you need to consider selecting an approved condo project, or financing the purchase without the help of the VA loan.
Does Condo Approval Guarantee VA Loan Approval?
If you do get your condo approved, does that mean that your VA loan will be approved as well?
Well… not exactly. A lot can happen beyond having the condo approved or denied for inclusion on the VA list. For instance…
- Your income or personal history might not make your lender comfortable. Remember that it’s the VA that has to approve the condo, but the lender who has to approve the loan. The VA program means that a lender is taking a smaller risk when they loan money out to a veteran, but it doesn’t mean that they are required to lend money to every veteran in need, even one who has put forth the time, money and effort to get a condo added to the VA list. Be that as it may, odds are in your favor that, if you can get the VA to approve a condo project, then you can get a lender to give you a loan.
- The condo management might not accept your application even after you’ve done their job for them and had them added to the VA list. Condo managers usually have specific criteria for any new people moving into the neighborhood. They like to maintain a certain sort of clientele. Likewise, the Homeowners Association might decide, for one reason or another, not to approve of your moving into the neighborhood.
The VA is only one of a few groups from whom you’re going to need approval. Even once you’ve leaped that hurdle, you still have to finance and get approved for your new home. This is why it’s a good idea to ask a lot of questions when you first meet the management at the condo project. Even if you can technically afford the condo, do they typically sell homes to millionaires? If so, then there may be unforeseen costs or the management may be incredibly picky about who they sell to. If you’re already talking to al ender, are they excited about your new condo? Or have they been trying to talk you down to a cozy townhouse a few blocks away from the project?
You need to get approval on all three fronts: You need the VA to be okay with the project, you need the condo management and the HOA to accept you, and you need your lender to see you as a viable prospect.
At this point, it may sound like more trouble than it’s worth. It’s true that there are already several condos on the VA list, many of which almost certainly meet all of your needs. So the question is: Why bother? Or rather, why does anyone bother going through the VA approval process?
In truth, many condo project managers will attempt to get approved on their own, rather than waiting for a potential buyer to come along and do it for them. You’re actually doing the management a huge favor by attempt to add them to the list, and footing the $850 bill.
So why bother?
Well, if you find the absolute perfect home, then it may well be worth the extra money and effort required to get it through the VA approval process. In more cases than not, there are plenty of other condos that will hit all the same boxes on your checklist, but if there’s only one near your daughter’s elementary school, then your options may be rather limited in that way.
It may be possible to sidestep the more difficult parts of this process by, well, putting that burden off on someone else. If you have a friend who’s a veteran and an attorney, then they may be able to help you out in order to get a nice new home of their own. You might be able to talk the management of the condo project into going through the trouble of getting VA approval on their own, with the promise that they’ll have a new buyer on their hands if they do. Or, you may be able to let your lender handle it for you.
Why’s the Process So Involved?
It can be frustrating to have to manage the process of getting a condo approved for your VA loan. But, the VA is only looking after our armed forces. A condo project can be declined because of shady dealings on the part of the management or HOA’s that only make life more difficult for the people who live in the neighborhood. In a perfect world, you’d be able to use your VA benefits however you like. Unfortunately, people who take advantage of people don’t seem to have any special sense of gratitude for those who’ve put their lives on the line keeping the rest of us safe. So the VA have to be vigilant in who they allow to sell to veterans using the VA loan.
The Condo Got Declined, Now What?
If you have solid credit, you may be able to apply for a loan outside of the VA program, or you can see if your second-favorite condo is still available.
Unfortunately, once a condo has been declined, that’s it for the time being. Unless you want to take on the task of asking the VA why the condo wasn’t approved, and then talking the condo management into making some changes, there’s not much you can do.
The Condo Got Approved, Now What?
The great news is that a condo project being approved is effectively permanent, it doesn’t expire. As long as nothing out of the ordinary happens, you’re set. Now you just need approval from the HOA, condo management, and your lender.
The process can be a long and difficult one, but if you’ve found your dream home and nothing else will do, it may be well worth it.