The Department of Veterans Affairs (VA) maintains an Approved Condominiums List. Once it is determined by the VA that a condominium project meets its set of minimum standards, it is added to the List. VA loans are only available in condominiums that appear on this List.
A Brief History of VA Condominium Approvals
The VA has long maintained an Approved Condominiums List for the purpose of determining the acceptability of condominium projects. For years, the VA added condominium projects to its list that met its or FHA’s minimum criteria for approval. If the condominium was on FHA’s approved condominiums list, that was sufficient for approval with the VA.
However, following the release of HUD Mortgagee letter 09-46b, the VA discontinued using the FHA Approved Condos list as a basis for approval. The VA felt that the new FHA guidelines and procedure for project approval did not line up with the VA’s criteria. Now, condominiums must seek separate approvals from both the VA and FHA if they want to be on both lists.
Criteria for VA Condo Approval
The most recent set of criteria for VA condo approvals is Chapter 16 of the VA Lender Handbook. Sections of this Chapter have effective dates of 2001 and 2003. The VA is currently in the process of revamping the guidelines and the Handbook as it pertains to condominiums.
Chapter 16 is only 43 pages in length and much of it deals with the criteria for the writing of an Attorney Opinion Letter. We can compare that to the 95-page Guide for FHA condominium project approval.
The basic criteria for obtaining a VA condo approval are fairly similar to those of FHA and Fannie Mae with certain nuances. The VA has far less tolerance for leasing restrictions than do both FHA and Fannie, for example.
However, the VA has a higher tolerance for investor concentration within a project – there is no ceiling. FHA caps investor concentration to 50%. Fannie Mae currently ignores investor concentration for primary and second home purchases.
The VA also does not have a criterion for the maximum single-entity ownership. FHA caps this at 50%; Fannie allows only 10% of the units to be owned by one single entity.
The VA only verifies that 70% of the units in a project have conveyed to someone other than the developer before VA financing is allowed in a project. Fannie Mae also has a 70% pre-sale requirement in most instances. FHA’s pre-sale requirement is generally only 30%.
Processing of VA Condo Approval
The VA has a checklist of the required documents for approval. It includes legal documents, proof 70% of the units have transferred from the developer, financial information (including a breakdown of any special assessments), the minutes from the last two Board meetings, copies of current service contracts (landscapers, maintenance companies, etc) and description of current easements.
An Attorney Opinion letter may be provided which certifies to the VA that the condominium meets the set of minimum standards.
A paper file of the documents is sent to the jurisdictional Regional Loan Center for review. An in-house Staff Appraiser is responsible for reviewing the file for acceptability. In addition, the file is also sent to regional counsel where the legal documents are reviewed to verify that the project meets state and local laws.
Processing times can take 30-60 days and is highly dependent upon the workload of the regional counsel. The VA says to allow up to 60 days for processing to be on the safe side. This time frame can be greatly reduced if an Attorney Opinion letter is provided.
One of the highlights of working with the VA is the accessibility of the Staff Appraisers. I have never called the VA to speak with a Staff Appraiser and not been able to reach one. They have all been very friendly and sound pleased to be answering questions.
ReadySetLoan Condo Team LLC is offering free processing for VA condo approvals for all condominium clients who retain us for an FHA condo approval. If you have questions about VA or FHA condo approvals, please contact us for a free consultation.