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Need to Know: Buying a Condo With a VA Loan

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Why on earth would you buy a condo, when you can own a house?

“A lot of reasons,” says U.S. Navy veteran Dennis Taylor, who recently purchased a condo in Long Beach, Calif., with his VA home loan benefits. “Being single, I didn’t need a lot of space, but I still wanted the American Dream. First of all, a condo was in my budget, and I was lucky that the real estate market was down at the time. With a little patience and the help of a good realtor, Dennis found the right property in his price range.

Related: Are you looking for the right agent? We can help. Find a Specialized VA Agent for Veterans and Military Families.

In addition to often being less expensive, condos require less maintenance, that is, from the owner’s perspective. The homeowners association (HOA) usually takes care of the yard work and exterior maintenance. This can be especially useful for active duty military. Additionally, condos often have amenities like state-of-the-art pools, gyms, and playgrounds included in common areas. In Dennis’ case, amenities were almost as important as price.

Dennis goes on to explain, “The condo I ended up buying has great amenities. The most important thing for me is parking. For Dennis, parking was sometimes hard to come by in Long Beach, and he received a few parking tickets. His condo complex offered excellent parking as well as excellent security. Its HOA fees are relatively low compared to some. That’s because his resort doesn’t have a pool or gym. These things can increase HOA fees, and they weren’t important to Dennis.

What also attracted Dennis was the common terrace with barbecue and comfortable sun loungers. Dennis has two adult children who visit him often and they enjoy cooking as a family. The area is conveniently close to Dennis’ unit, which is on the third floor, and incidentally has a million dollar view of the city lights at night. In the end, this place was the best choice for Dennis and his family.

What is a VA Approved Condo?

If you are considering buying a condo with a VA loan like Dennis, you need to know that the development has to be VA approved. VA-eligible borrowers should do their homework before choosing a condo to buy, or they may run into trouble trying to get a loan.

To be on the VA’s list, it means that the HOA must have, at some point, applied and received approval. VA’s goal is to help protect the interests of veterans and the government by ensuring that all properties located in an approved community of common interest meet VA’s criteria. A complete list of requirements for VA-approved condos can be found in Chapter 16 of the Department of Veterans Affairs Lenders Handbook.

How do I find a VA approved resort?

An easy way to find a VA-approved resort is to search for properties on the Veterans Information Portal, which can be found here. Simply type in the city and state where you want to buy and get a list of approved properties. If you work with a real estate agent who has experience with the VA loan program, they will most likely do this research for you. No matter who does the research, this step is about to get easier for buyers in a few states.

If you live in California, like Dennis, a new law effective July 1, 2016 dictates that HOAs must disclose in their annual reports whether their development of common interest (CID) has been approved by the FHA and VA. Condos are considered CIDs. Once the effects of this new law take effect, all you need to do is ask to see the report.

Dennis’ Realtor®, Joanna Rodriguez-Martinez with MR & Associates, welcomes the new law with open arms. “It can be a real headache to figure out if a condo is approved or not,” says Joanna. She explained that sometimes the listing agent knows, but most of the time not. It’s Joanna’s experience that even the HOA may not know about. To make sure her clients with VA home loan benefits can buy a property, Joanna usually ends up doing the research herself.

She goes on to explain, “The worst part is when a client has fallen in love with the place only to find out it’s not VA approved. Then we have to go out and find another condo, always comparing it to the one they can’t have. Now with the new law, at least in California, it’s the HOA’s job to know for sure, and Joanna thinks the new law will help her show up more easily. [condos] to its military customers.

According to Assemblyman Ed Chau, the author of the bill that became California law, FHA and VA approval improves property values ​​within a community. The loss of approval, or lack thereof, can lower the value of each unit. This may therefore encourage HOAs to seek VA approval.

What if your condo is not on the “List”?

Let’s say you find the perfect condo unit with all the features and amenities you want, and for some reason it’s not on the VA approval list. Does that mean you can’t buy it? If your heart is set on a development that is not on the list, all is not lost.

First, make sure you know what type of property you are dealing with. Condos require VA pre-approval, but other similar types of real estate like townhouses do not. You or your real estate agent can quite easily check with the county records to confirm if it is a condo. If you discover that the property you want is a condo that is not yet approved by the VA, you can approach the HOA and encourage them to apply. HOAs for California condos would contact the Phoenix Regional Loan Center to get started. It may delay your purchase, but it might be worth the wait if you think it’s “the only one”.

Ready to start?

If you’re ready to get started or just want more information about the process, the first step is to get several quotes without any obligation. You can then discuss with the lenders the qualifications, debt to income ratios and any other concerns regarding the process.

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