Thinking about purchasing a condominium? Did you know there are VA approved condos? You know about all the great benefits you get by utilizing your VA home loan benefit. You don’t need a down payment, you don’t have the additional cost of Private Mortgage Insurance and you can finance 100% of the home. But what if you aren’t interested in all the work that comes with owning a home? Maybe condo living would be a better fit. There are more regulations when using your VA loan for a condo, but it can definitely be done. The easiest way is to find a condominium development that is already pre-approved by the VA.
Advantages of Owning VA Approved CondosWhat are the advantages of owning a condo over a detached single family house? There are many, and it really depends on your preference and style of living. If the word condominium dredges up thoughts of a small, dark living space, you might be surprised. Many newer condos have a large amount of space, including open concept floor plans, large windows and decks or balconies. One of the big draws of buying a condo is affordability. Condos almost always cost less per square foot than single family homes in the same zip code. This may give you the opportunity to live in a higher cost of living area closer to where you work, possibly saving you both time and money in commuting costs.
Condos are also very low maintenance. When you buy a house, you are responsible for all the upkeep: yard work, leaky pipes, painting and more. In a condo, the Homeowners Association (HOA) is usually responsible for all exterior work and even some internal repairs. Military life can be hectic enough, so this is an especially popular option for many service members.
Condo developments often have extra features that may appeal to you. Health clubs, workout rooms, community barbecue areas, and even spas can be located right on the property and within walking distance of your unit. Having amenities like this might mean your HOA fee is higher than normal, but if you use these types of facilities, you’ll have access to them much cheaper than paying for them separately.
Another reason condo living is attractive is added security. You get that just from living among other people, but many properties also have security guards on site or even a staffed gate. This might be a familiar feeling for military personnel who are used to living on a military base.
A VA approved condominium or townhouse has already undergone a review by the Veteran’s Administration and has been approved for sale. The VA does not usually look at individual units for approval, they are much more interested in the property as a whole. They want to make sure the condo development is suitable for veteran’s needs, not only for living purposes but also when it comes to resale value.
There are a few basic requirements the VA looks for to approve a condominium complex for financing. First, 35% of the units must be owner-occupied, meaning that only 65% can be rented out at any one time. Second, no less than 90% of people must be current with their Home Owners Association fees. This makes sense, considering the HOA needs to have a healthy reserve of funds to promptly take care of any maintenance issues. And last, for newer projects, the property must be at least 75% sold. There are also some regulations surrounding how much say the Homeowners Association has over the units.
For example, the VA does not want the HOA to have input on whether a unit can be foreclosed upon. They also must allow leasing of the unit with no minimum occupancy time limits. Active service members could receive PCS orders at any time, and they should be allowed to rent the unit to a third party if they need to move out quickly.
VA Approved Condo List
Once you decide that you want to use your VA home loan to finance a condo, where do you find VA approved condos for sale? The best place to start is the VA.gov website. There you can perform a search for a VA approved condo list of properties that have already gone through the vetting process. These developments are already approved for VA loan financing. This list is updated in real time, so it’s always current. When you navigate to the page, you’ll see five criteria to fill out:
1. Report type (Summary will list just the names of the condos, and detailed will give you their address and status)
2. Check box for “Retrieve Only Approved Condos”
3. A place to enter the Condo’s name
4. The regional office where the condo is registered
5. The city, state and county where the condo is located
There are several ways you can initiate a search for your VA approved condo list. For example, say you are looking for all VA approved condos in Connecticut. You would choose:
1. A Summary report
2. Check the box for Retrieve Only Approved Condos
3. Enter Connecticut for the state
4. Click search.
This will give you a list of all approved condos in the state of Connecticut. But what if you saw a listing online for a unit located at Apple Grove in Rocky Hill CT? This time your search may look like this:
1. A Detailed report
2. Leave the check box blank, as you do not know whether or not this property is VA approved.
3. Type App* in the name field. When searching a database, the asterisk serves as a place holder for other characters.
4. Enter Connecticut for the state
5. Enter Rocky Hill for the city
When you do this, you get the single listing that states that Apple Grove is HUD accepted. When searching for a specific name, the less information you put in the better. By using the asterisk you can widen or narrow the search easily. Typing an “A” followed by an asterisk will give you all condos that start with the letter A. If you change it to “Ap” followed by an asterisk, you’ll get all condos starting with Ap.
There are several different statuses you will find when searching the VA approved condo database.
Accepted Without Conditions is the golden ticket. This means that the condo is fully cleared for VA loan financing. If your condo has this status, getting your loan will be no different than if you were buying a single family house.
Accepted With Conditions means that the condo development is VA accepted, but there are some mitigating situations that need to be resolved. For example, maybe the property is approved but they have not met the 75% sold requirement. Or there may be a small litigation active on the building, with the potential to increase HOA fees in the near future. With this approval status, most often the borrower will need to sign a statement that they are aware of the “condition” and will move forward cautiously.
HUD Accepted means that the property is already approved for FHA lending requirements. In the past, the VA used to simply accept properties that were approved by HUD (Dept. of Housing and Urban Development)as VA acceptable as well. This is no longer the case, but chances are if the property is HUD accepted, VA approval is within reach without too much trouble.
Unaccepted is self-explanatory. These properties do not meet the standards for VA approval.
If the condo you are looking at does not have an approval status, your best bet is to move on to a different property. In rare cases, you might be able to convince the HOA of the condo itself to apply for VA approval status. The VA condo approval process can take a long time – weeks or even months, and there’s a good chance you will fail in your attempt to convince the HOA to go through the time and expense. It may be best to save yourself the aggravation and find a condo that is already accepted.
Once you find yourself a condo that is Veterans Affairs approved, what’s involved in applying for the loan? The financing process is pretty straightforward once you have approval status for your property. You’ll have to meet the eligibility requirements to qualify for VA loan funding. In general, If you are a Veteran, Active Duty Service member, or a former/current member of the National Guard or Reserves, you will probably qualify without issue. The minimum service requirements vary depending on your military category and when you served. For example, you only need to have served 90 consecutive days if it was during a period of war. If you served in a post-war period, your requirement could be 181 days for post-Vietnam war, or 24 continuous months if you served between 1980 and 1990. To find the eligibility for your particular situation, click here.
If you do not meet the minimum service requirements, you may still qualify if you were discharged for reasons beyond your control. These reasons include things such as hardship, certain medical conditions or a reduction in force. Unfortunately, if you received a bad conduct or dishonorable discharge, you are not eligible to receive a VA loan.
You will also need to meet all the standard qualifications set forth by your lender. Since the VA guarantees the loan, lenders usually can relax their requirements quite a bit. But you still need to prove that you can handle the payments of the mortgage.
The VA does not require a minimum credit score to qualify for a loan. However, banks still use it as a measure of your overall credit risk. Your credit score for a VA loan should be a minimum of 620, but some lenders may
go as low as 580. It’s a good idea to check your credit score to find out where you stand before you start the loan process.
You will also need to prove you have a stable income that allows for proper care of the home. This is your debt-to-income ratio, or DTI. The VA advises a DTI no greater than 41%. Only certain expenses count toward determining your DTI. Your mortgage will be the largest expense, followed by installment loans for cars, and education. Credit cards, alimony and child support payments are also included. The VA wants to get a well-rounded picture of your financial health, so lenders may also look at child care costs and utility bills.
The VA also looks at residual income. They want to make sure you have enough income left after paying your monthly bills to handle regular monthly expenses. The residual income is related to your debt-to-income ratio, but not the same. To find your residual income, subtract the expenses used in figuring your DTI from your monthly income. The amount left over is meant to give you enough cushion to allow you to live comfortably. Taking this extra step allows the VA loan program to boast very low foreclosure rates. Only 1.98% of VA home loans wind up in foreclosure.
Veterans Affairs approved condo loans also need to conform to the current VA loan limits. The reason that a VA loan has no down payment or private mortgage insurance requirement is because the VA guarantees 25% of the balance of the loan in case of default. For most areas in the United States, they will guarantee 25% of a loan up to a maximum of $484,350. However, Veteran Affairs is aware that there are many places where the cost of living is much higher than the average. In certain counties, they will guarantee 25% of up to $726,525. Remember that just because the VA will guarantee a loan up to $484,350 does not mean that you will qualify for that much. If you happen to be on the lower end of the military pay scale, you might not have the income requirements to meet the debt-to-income and residual income guidelines to qualify for the maximum amount. The final amount you are allowed to finance is ultimately up to the lender.
Rounding back, if you are looking for the benefits of home ownership without having to deal with a lot of extra maintenance, a condo or townhouse may a good fit. It’s best to stay open minded when shopping around. If you can pick from the list of Veteran Affairs condos that are already approved for financing, your transaction with go quickly and smoothly. If you would like more information about using your VA loan benefit to buy a condo or townhouse, give National VA Loans a call at 855-956-4040.