If you were wondering if you can use a VA loan to buy a condo, you're not alone. Many veterans ask this question every day. The answer is yes AND no. Below I will explain when you can use your VA eligibility to purchase a condo and when you cannot. I'll go over the benefits as well as potential downfalls to owning a condo. In addition, I'll spell out the process you can expect, to overcome the occasional issues that arise when purchasing a condo with a VA loan.
Top 5 Benefits to Owning a Condo
Condominiums have associations which maintain the property and exterior. This is especially beneficial for active military personnel that expect to be overseas for extended periods of time as they don't have to worry about lawn maintenance or even potential damage from storms.
Condominiums have associations that maintain the structure, unlike single family residences. Condo owners are thus, only required to obtain "renter's insurance" to cover contents inside the walls rather than the more expensive "hazard insurance" that covers the exterior. This can save hundreds of dollars a month depending on the value of the property.
Easy to clean
More often than not, condominium units are quaint. Less space of course means less time spent cleaning.
Because most condominiums are multiple stories, you can have amazing views of the city or scenic horizons depending on the location.
Great Investment Opportunity
Condominiums make great opportunities for investment income. What does this mean? Condos are often used as either contractual or seasonal rental properties. Now of course, VA doesn't allow you to purchase a condo as a rental property. However, often times plans change, requiring you to move and for one reason or another, you simply can't sell the property. This is very often the case for military transfers. When this happens, you not only can rent out the property, but you can get a 2nd VA loan at the same time on the new property as long as you meet VA's initial property usage guidelines.
3 Potential Downsides to owning a Condo
Expensive Condo Association Dues
Condo association dues can be very pricey depending on the location of the development. Even though insurance can cut the monthly payment, association dues can easily be 10 times more than what you would save in lesser priced insurance. Be sure to compare the cost versus savings of owning a condo over a single family residence. The maintenance you lose by purchasing a single family residence versus a condo can easily be contracted out yourself, and in most cases for much less.
Depending on location and demand, single family residences outperform condos with regards to equity gains. This could mean less or no equity when you go to sell later.
Less Room to Grow
Due their limited size in most cases and the inability to renovate, condos may not be the best idea if you plan to have a family in the near future. Combine this with the fact that some condos don't appreciate as quickly, you may find yourself stuck in cramped quarters later down the road.
How to Buy a Condo with a VA loan
If you decide that a condo fits your goals, purchasing a condo with a VA loan isn't terribly difficult. There are certain hurdles that you may have to overcome when compared to single family residences, but in most cases it's no more difficult.
Make sure it's a VA Approved Condo
Protecting the veteran is VA's primary objective. This is no different in the case of condo purchases. Making certain the veteran doesn't end up in a development that places unfair burdens or restrictions is a main objective. Therefore, the condo must be approved by VA before you can use your VA entitlement to purchase it.
To find out if a condo is approved, you can ask your lender to search or simply go to the VA portal here and conduct your own search.
What if the Condo isn't VA Approved?
"You cannot use a VA loan to purchase an unapproved condominium". This is the most obvious answer. However, this doesn't mean you can't purchase the condo at all. It simply means, it first must be approved. This may or may not be a long and painful process. It will all depend on the level of expertise of your lender as well as the willingness of the condo association to provide the necessary documentation. Your mortgage lender will need to formally ask the VA to approve the development. So you can see where having a VA Loan Specialist working for you can make all the difference. Connect to a VA Loan Specialist to assist you here.
VA requires several documents and information from the condominium development. Some of these documents include:
- Condo association bylaws
- Plot maps
- Covenants, restrictions and conditions
- Special assessments and litigation statements
- Meeting minutes from recent condo association meetings
Condo approval is not a quick process. One, it generally takes quite a bit of time to gather all of these documents. Then, once the lender receives them and they’re sent off to VA, it could easily take over 30 days to get an answer back. The answer you get may not always be what you are expecting.
In the end, using a VA loan to buy a condo can be a huge benefit. However, be prepared for the unexpected and ALWAYS use a VA Loan Specialist as this will make the process MUCH less stressful.