One of the advantages of the VA loan benefit is the ability to buy property with no money down. But an equally important benefit is the ability to buy more than just a typical suburban home; did you know you can use your VA loan benefits to purchase a town home, a modular or manufactured home? You can also use a VA loan to purchase a condo unit, but there are some additional requirements to do so.
One of those requirements is that the property be on or added to the VA approved list for condominium projects. A borrower who finds a condo to buy with a VA loan may feel discouraged at first if the condo isn’t on the list, but VA loan rules do permit a lender to submit paperwork to add a condo project to that list.
A condo unit may be added to the list if it meets VA criteria, and in times past getting the project onto that list meant submitting paperwork to the VA and waiting for that paperwork to make its way through the system. But recently the Department of Veterans Affairs has announced a major improvement to the entire process.
Now lenders will submit their application paperwork exclusively online rather than on paper. According to VA Circular 26-16-35, “In an effort to reduce the time and costs involved with approving condominium projects for the VA Home Loan program, VA is transitioning the submission of condominium approval documents from a largely manual paper process to an electronic process…Once the upload with all the required documents is complete, the Regional Loan Center (RLC) of jurisdiction will notify VA’s legal counsel to begin its review.”
That review includes making sure the condo project doesn’t contain any restrictions on the borrower’s ability to freely sell or dispose of the property. Some condo projects have a clause known as the “right of first refusal” which allows to condo owner’s association to approve or deny the sale of a condo unit in the project. This is unacceptable for VA home loans, which require the borrower to be free to sell his or her property at any time, without restriction.
Once the review process has been completed by the VA, “The RLC reviewer will review the opinion from VA’s legal counsel, complete the Disposition Code in the condominium record, and add any conditions in the condominium condition section” of the online submission form.
Speak to a loan officer to learn more about how condo projects can be added to the VA loan approved list.