VA Approved Condos Eligibility
If you are a military veteran, you are eligible for some financial incentives and benefits. One of these incentives is known as a VA mortgage. These mortgages have more relaxed restrictions than conventional loans. These loans help former servicemen and women affordably buy a home once they complete their military service. While most homes qualify for this type of loan, some condos, unfortunately, do not. If you are interested in a condo, you will need to select one of the VA approved condos to use this loan type as financing.
How Does a VA Loan work?
A VA loan works similarly to a conventional 30-year mortgage, except that it has relaxed requirements. With a traditional mortgage, you need 3-20% as a down payment. If you don’t have the full 20% down, you will have to pay something called “Private Mortgage Insurance” or PMI. This insurance protects the bank from losses in case of default. Your credit score needs to be sufficiently high, as well.
VA loans loosen these requirements a bit. To obtain a VA mortgage, you will typically need a credit score of 650 or better. Many lenders will make the loan with a lower score (such as 620), but with a score of 650 or more, you are much more likely to be approved.
Loans through this program also require no down payment. As a veteran, you can buy your dream condo with $0 down. While many people elect to do that, there is an upside to putting at least 5-10% down. VA loans have a funding fee. At 0% down, that fee is often 2.15% of the total purchase price. On a $200,000 condo, that would be $4,300. If you can put 5% down, that rate typically goes down to 1.5%. On the same $200,000 condo, the funding fee would be $3,000. By being able to put $10,000 down, you can save $1,300 on the total loan amount. If you have the funds, it makes sense to put some money down!
No matter how much you do or don’t put down, there is no PMI on a VA loan. If you put the bare minimum of 3% down with a conventional mortgage, PMI costs about 1% of the total loan value per year. On a $200,000 condo, that would be about $150 per month, just for insurance.
In addition to not having PMI, VA loans typically charge 0.25% less per year in interest. While the average rate for a conventional mortgage might be 4.5%, a VA loan would often be at 4.25%.
To summarize, on a $200,000 condo, with 0% down, the monthly payment on a VA mortgage would be $983 per month. On that same condo, a conventional mortgage with a 3% down payment would be at least $1,100. In this scenario, a VA loan not only saves you from needing $6,000 down, but it also lowers your monthly payment.
A VA Loan Sounds Great. Is My Condo Eligible?
While VA loans have incredibly favorable terms for veterans, they do come with one substantial caveat. You must select a unit from one of the VA approved condos. If your desired condo is not on the approved list, then you cannot get a loan to purchase it.
To find condos that are approved, you will need to use the Department of Veterans Affairs website: https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch. The site looks like it belongs in the 1990s as opposed to 2019, but it works.
If you’re using a real estate agent, let them know that you are eligible for a VA loan. They can pull listings from MLS that are VA loan eligible. That way, when you look at properties with your agent, you only go to ones for which you could obtain this loan. Using a real estate agent is by far the quickest and easiest way to explore VA approved condos.
It’s worth noting that the entire complex is either approved or denied for VA funds. The Department of Veterans Affairs does not look at each condo unit. If the condo project is approved, you can buy any condo unit within that complex.
My Condo Is Approved. How Do I Apply?
If you find your dream condo, and it is approved, the application process is similar to that of a conventional mortgage.
You will need a certificate of eligibility. This certificate verifies that you are a veteran and that you qualify for this program. Your loan officer can likely get this for you. If you need to request it yourself, you can do so from the Department of Veterans Affairs.
You will need to submit evidence of employment and other sources of income. The bank will need to pull your credit score to make sure it is high enough to qualify. Once that is all verified, a VA approved appraiser will need to take a look at the condo to make sure it is worth at least what you offered for it. If the unit doesn’t appraise, you would have to make up the difference with additional money down.
My Desired Condo Is Not Approved. Can I Apply?
Unfortunately, no. You cannot obtain a VA loan for an unapproved condo project. Additionally, you cannot apply to have a condo project approved. That application has to come from the HOA itself. You can talk to the board and see if they want to submit a request for VA approval, but that will cost money and take weeks to process. Also, they will likely have to hire an outside attorney, which very small HOAs may be reluctant to do.
Your path of least resistance is to find a condo project that already has approval from the VA. Fortunately, there are many HOAs and COAs that have already applied and have VA blessing!
VA Approved Condos: The Right Approach For Any Veteran
Veterans who are looking at buying a condo would be well-advised to find one that has been VA approved. VA loans are significantly cheaper and easier to qualify for than conventional mortgages. They offer even better terms than FHA loans.
If you are a veteran and are looking at buying a new residence, let your realtor know. Have them review VA approved condos with you so you can get into your new place with fantastic mortgage terms!
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