Condo living can provide a convenient and affordable alternative to renting or purchasing a single-family residence. Depending on where your next military move is, it might be a viable option. Before committing to buying a condo with your VA benefits, you should know the VA requirements for a home loan. Here are four key things to do:
1. Weigh the pros and cons of condo ownership
As you review your home buying options, it’s important to consider whether condo-style living matches your lifestyle as well as your ideal budget. Condos are often more affordable than single-family homes. They also may provide compelling on-site amenities like fitness centers, outdoor recreational areas, and pools. In addition, they typically offer lower insurance rates than private residences and are often located in coveted downtown areas.
Many condos provide grounds and building maintenance. This relieves owners from some of the hassles and responsibilities associated with home ownership. On one hand, it makes condominiums ideal for those who deploy or those too busy or uninterested in conducting maintenance. On the other hand, this upkeep may come at the cost of additional fees. It may also require adherence to specific association rules and aesthetic standards.
As you choose between different condominiums, it’s also important to look into how the property is managed. Look at what the association budget is, and how the budget is allocated. Knowing this will help you gauge the association’s level of responsiveness and their ability to solve problems in a prompt and effective way. In addition, it’s never a bad idea to meet some of your would-be neighbors and assess whether their lifestyles mesh with your own. It’s not realistic to be best friends with everyone in your condominium. However, it’s important everyone is respectful, cooperative, and aligned on key association rules.
2. VA loan condo approval standards
In order to use your VA benefits to purchase a condo, the property must meet certain VA requirements. These standards are intended to protect your best interests. It also ensures the condo association is a financially viable business and sound property investment. To qualify, a condominium must provide apt financial documentation and reserve a stipulated percentage of its budget for addressing maintenance issues. Furthermore, a certain percentage of the condominium must be occupied by owners. All units must be fully insured against damages. Additionally, the majority of residents must have a low payment delinquency rate, among other criteria.
You can browse a list of VA approved condos on the Department of Veteran Affairs website. You can also request information from their database to get a better sense of how different properties compare. Condos that have been “accepted without conditions” are fully approved for mortgage financing. If a condo was HUD (Department of Housing and Urban Development) approved before December 2009, it may automatically qualify for VA mortgage financing without requiring additional VA approval. Inquiring about the approval status of potential condo units will help you narrow down your search and determine the best course of action moving forward.
3. Review your VA loan eligibility
Along with looking into condo approval standards, don’t forget to consider your personal qualification criteria. To be eligible for a VA loan, veterans must meet certain service requirements. You must purchase within VA loan limits, and not exceed a stipulated debt-to-income threshold. Practicing smart credit usage and consulting a VA loan expert will help set you up for success.
4. What to do if a condo doesn’t meet VA requirements
Not all condominiums will be listed in the VA’s database—but that doesn’t mean they don’t qualify. During your next military move, if a condo you’d like to purchase isn’t VA approved, you may want to encourage the association manager to apply for VA or HUD approval. If the condo is in good condition and meets all the baseline VA requirements for a home loan, the application will be approved. You’ll be eligible to use your VA benefits when purchasing the unit.
Not all condo managers will be receptive to your requests to become VA approved. If your requests aren’t being heard, it helps to have a VA loan expert on your side to advocate for VA condo approval and help you review your mortgage options.
Rick Elmendorf of Caliber Home Loans has over 20 years experience helping families become successful home owners. Rick believes the mortgage process should not be difficult or intrusive, but rather flow from start to finish. The team at Caliber Home Loans actively manage your loan throughout the entire process and strategically monitor it to ensure the structure always fits your short and long term financial goals.