In addition to purchasing a standard single-family home, your VA home loan benefit can be used to purchase a wide variety of different properties. This includes townhomes, manufactured homes, multiunit properties, or even condominium units.
For borrowers interested in condos, it’s important to take note of some VA rules and regulations that are specific to condo purchasing and ownership.
In order to be eligible for a VA loan, a condo development needs to have been approved by the Dept. of Veterans Affairs. This helps ensure the property is in good condition, there is a minimum occupancy rate, and that the majority of residents are current on their Homeowners Association (HOA) dues.
If you’re interested in a particular condo, you can check the VA’s online condo database to see if the development is already approved. There are also options to request approval directly from the VA.
Condo associations will sometimes add a clause to their contracts called the “right of first refusal,” that states the HOA has the option to buy or lease an individual unit before the sale of that unit is approved for an outside buyer.
This means that if a buyer wants to purchase the condo, the HOA has the right to buy it first for the same price and terms, giving them the opportunity to renovate the unit into a community room, a guest apartment or a manager’s office. It also means the association can outright reject an offer they feel is below the market rate if they believe it’s going to lower the appraisal price of other units.
The VA will not approve condo projects that have the right of first refusal in the paperwork. There are several other requirements, but the presence of such a clause prohibits the condo from being listed regardless of meeting those other requirements. A condo project rejected by the VA may be resubmitted for review once the issues causing the rejection have been addressed.
If you would like more information on a specific property or help with requesting VA condo approval, get in touch with a VA lender today.