There are a wide variety of options available on the housing market, and there are VA mortgage loans for many of those options; you can apply for a VA loan to buy a town home, mobile home, duplex, even a condominium.
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VA Condo Loans and the Right of First Refusal
There are a wide variety of options available on the housing market, and there are VA mortgage loans for many of those options; you can apply for a VA loan to buy a town home, mobile home, duplex, even a condominium.

For borrowers who want VA condo loans, there are VA rules and regulations that address circumstances unique to condo purchasing and ownership. Those rules include the requirement that condo projects be on a list of VA-approved projects.

One thing that's important to point out--condos can't be included on that list if the owner's association bylaws for that condo include something called the "right of first refusal" clause.

That clause is sometimes found in the condominium equivalent of a home owner's association agreement or related documents which describe the condo owner's association rules and bylaws. The "right of first refusal" gives the association the option to buy or lease an individual unit before the sale of that unit is approved for an outside buyer.

The implications for a VA borrower who wants to buy in a project featuring the right of first refusal clause? If the buyer wants to purchase a condo unit in a building where the right of first refusal is in effect, the buyer is offering to buy the unit, but that offer is contingent on the condo owner's association not buying that unit first.

The Department of Veterans Affairs does not approve condo projects that have the right of first refusal in the paperwork.

Here's a quote from "The VA Home Loan Program For Real Estate Professionals" published by the Manchester, New Hampshire VA Regional Loan Center, which covers the right of first refusal issue:

"Condominiums must be approved by VA or HUD before any units in the project are eligible for VA loan guaranty.This is generally handled by the lender but a real estate professional or developer may submit documentation prior to a veteran being involved in a transaction to plan for the future.Common issues that do not allow us to approve projects are rights of first refusal or lease restrictions. VA does not have an owner occupancy ratio requirement but does have a 70% presale requirement."

Condos not currently listed on the VA approved list are required to be reviewed before they can be included--that review includes an examination of the condo association bylaws and owner's agreements. Those without the right of first refusal clause aren't automatically approved--there are several other requirements--but the presence of such a clause does prohibit the condo from being listed regardless of meeting other requirements. A condo project rejected by the VA may be re-submitted for review once the issues causing the rejection have been addressed.




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