Buying a condo with a VA loan

Buying a condo can be a smart move for veterans or active-duty military personnel who want a low-maintenance home in a community with amenities. To buy a condo with a VA loan, it must meet VA standards, including a financially sound homeowners association (HOA). Let’s look at how to find VA-approved condos, what standards they must meet, and your options if the condo you have an eye on is not on the VA-approved condos list.

Can you buy a condo with a VA loan?

Yes, if you qualify for a VA loan, you can use one to buy a condo. The process is similar to buying any other type of home, with one exception: The condo itself must get VA approval.

A condo, as defined by the VA, is a common-interest community in which individual condo owners hold title to their units but share ownership of common areas. The shared spaces include things like parking garages, landscaping, elevators, hallways, pools, and fitness rooms.

Before financing a VA loan for a condo, the VA ensures the condo's HOA is financially sound and its rules don’t overly burden VA borrowers. The VA checks for stable budgets, reasonable dues, and policies that don’t restrict owners.

Similar rules apply to townhomes.

How to find a VA-approved condo to buy

Let’s look at the steps you can take to buy a VA-approved condo.

• Search the VA-approved condo list. The VA maintains an official database of approved condo projects. You can search the VA condo database, which will show whether a project is approved, unapproved, or withdrawn. When you review the returned data, look closely at project names and locations to ensure the exact project you’re interested in is on the list.
• Work with a VA-savvy real estate agent. Because of the special rules that come with VA loans for condos, it’s important to work with an experienced real estate agent. Agents familiar with VA-financed condos can help you navigate the requirements, reducing the time and stress spent.
• Check approval status through your lender. You also can ask your lender to check the status of a condo complex you’re interested in.

What makes a condo HOA ineligible for VA approval?

Unfortunately, not all condo communities qualify for VA approval. Here are the reasons they can fail to make the cut.

• There’s a right-of-first-refusal clause. Sometimes, the HOA has the right of first refusal, which means that if the owner wants to sell their condo, the HOA gets the first chance to buy it and must refuse before it can be sold to anyone else. This restricts the owner’s ability to sell freely.
• The owner-occupancy rate is low. According to VA rules, at least 50% of the units in the complex must be owner-occupied. High owner-occupancy signals stability and lower risk.
• Residents are behind on HOA payments. Another measure of stability and good management is the payment of dues. The VA wants to see at least 75% of the owners current on their dues. The VA may also place a cap on the fees the HOA can charge.
• Most of the units in a new development are unsold. Similarly, if the condo complex is new, at least 75% of the units must be sold before the community can be added to the VA-approved condo list. Also, no single entity may own more than 10% of the units.

What to do if the condo isn’t on the approved list

You can ask the VA to add a condo to its approval list, but it can take months, with no guarantees. The process requires cooperation from the HOA and the lender. You can ask the HOA to apply directly, and they’ll need to provide detailed information about the community's bylaws, finances, and ownership.

The HOA typically covers the legal fees, but if you provide a legal opinion paper through an attorney, it can speed things up. Lenders and your real estate agent may be able to help with the process.

You can find guidelines for the approval list in Chapter 16 of the VA Lender’s Handbook. It also includes a link to check the status of specific condo complexes.

FAQ

Here are answers to common questions about VA condo approvals.

How do I access the official VA condo approval list?

There is a condo search tool on the U.S. Department of Veterans Affairs website. Enter details such as state, city, or condo name to narrow your search. It will tell you the status of your desired condo complex.

Where can I find the VA’s approval guidelines?

Chapter 16 of the VA Lender’s Handbook has the official condo approval rules. You can learn about eligibility requirements, HOA documentation, and owner-occupancy standards.

How long do VA condo approvals last?

Once approved, a condo project does not expire or require renewal.

Can a condo be VA-approved but not FHA-approved?

Yes. VA and FHA approvals are separate processes and have different requirements.

The bottom line: VA loans and condos can be a great fit

You can use a VA loan to buy a condo as long as you’re eligible to take out a VA loan and the property’s HOA meets the VA’s requirements. The process for getting your VA loan can feel like it has additional hurdles to overcome, but there are significant benefits to gain. The VA will check condo developments to make sure they’re a good investment for you, HOA fees, the other unit owners and the owner-occupancy rate in the development or complex.

Ready to buy a condo with a VA loan? Start the approval process with Rocket Mortgage^®. Learn whether you qualify for a VA loan to start your condo search as soon as possible.