So your buyer wants to use their VA loan on a condo? Make sure you follow this plan to avoid extra stress.
It’s easy for agents and buyers to get frustrated with the condominium approval process, so setting clear expectations early with all parties can prevent additional problems. While purchasing a previously unapproved condo can add some additional work, it’s completely possible to close this type of loan.
Aside from knowing how to close a VA loan on a VA approved condo, knowing the way through VA loans condo approval process can save you lots of headaches. Here is your roadmap to reach a successful VA condo closing: Check for VA approved condos, obtain approval, submit necessary documents to the condominium association and wait for the results.
Step 1: Check the VA database for Approved Condos
The quickest and easiest route to closing is for the buyer to select a VA approved condo. First, check with the VA’s website to determine which condos are approved in your area, then tailor the list to fit your buyer’s needs.
If a buyer selects a condo that is on the approved list, you simply need to notify their loan officer — no additional steps necessary. However, if your buyer has already selected a condo that’s not on the list, or there aren’t any condos on the approved list that are appealing to them, the process gets more complicated.
Step 2: Discuss Willingness to Obtain VA Approval
If your buyer falls in love with a condo that isn’t approved, your next move is to talk with the property manager or association at condo the buyer likes. The condo will need to go through a VA loan approval process, which can add some extra time to the process, and be extra work for the people in charge of the condo. If either the association or seller are unwilling to provide this accommodation, you’ll have to have a hard chat with your buyer about choosing a different loan product or a different condo.
Step 3: Communicate with the Buyer’s Loan Officer
There is a list of documents the condominium association will need to provide before requesting approval, and they are outlined in full in Chapter 16 of the VA Lenders Handbook. They include:
- A written request for VA Approval
- A copy of the condominium’s organizational documents. These documents are reviewed to ensure VA compliance. (For a detailed list, review Chapter 16-A.03 of the handbook.)
- Attorney Opinion Letter. This is not required, but it’s strongly suggested if the condo hasn’t been previously approved by the Department of Housing and Urban Development (HUD) or the United States Department of Agriculture (USDA). When you conduct the condo search on the VA website, the listing should note if previously approved by these agencies. (The suggested contents of this letter are outlined in Section B of Chapter 16.)
- If there is a state agency certification of the condominium, include it. These may not be present in all states and areas. This certification states that the condominium was created in compliance with the laws of said state.
Communicating with the buyer’s loan officer throughout the process can be very helpful. They’ll likely be the one communicating with the Regional Loan Centers (RLC), and may even have forms or examples of each of the required documents for you to provide the association.
Step 4: Wait
The VA will process the documents submitted in the order received (you’ve heard that before, right?). Processing is conducted by the office with jurisdiction. A list of the VA’s RLC is available here.
The processing time can vary from one RLC to the next, so ask the loan officer you’re working with if they are familiar with the specific turnaround times for your region. As a general rule of thumb, plan for 30 days. This can be the most frustrating part of the process. Unless the submitted documents need to be supplemented, you aren’t likely going to hear from the RLC with updates. It’s a waiting game and keeping the buyer and seller calm can be difficult. By ensuring every party to the transaction is aware of the process from the start and asking for additional time upfront, you can reduce the number of anxious calls and emails you receive asking for updates.
Step 5: Approved or Denied
After the entire file is reviewed by the RLC and any supplementary documentation has been provided, the condominium will either be approved or denied. If denied, you’ll receive a letter outlining the VA’s reasoning. There are circumstances where a denial can turn into an approval, but this is completely dependent on the reasons for the denial. For example, if the condominium was denied due to a specific clause in the organizational documents, it’s possible the association could amend the clause to meet VA loan requirements. Talk with the loan officer on the file to see what troubleshooting you can do before giving up.
If approved, you are set to move forward with closing!
If you have any questions about this process, please don’t hesitate to email me at firstname.lastname@example.org.
Photo courtesy of Phillip Pessar