If you’re shopping for a home in Hawaii using your VA loan benefits, consider yourself lucky. That means you have earned the privilege of using this military benefit; the VA loan is wonderful for a lot of different reasons.
What are the Pros of Using a VA Loan?
The obvious one is the opportunity to buy a home with very little savings since there is no required down payment (*there are VA loan limits for $0 down payment, which varies by state).
That alone is a reason to buy vs. rent, but in addition to that, there are no restrictions on locations or neighborhoods in order to utilize the VA loan, unlike some other government loan programs like the USDA loan, for example.
Other pros for you to use your VA loan benefit, is that interest rates are very competitive, often lower than other loan programs. The owner occupancy of the complex is not a factor either, unlike for an FHA loan.
What are the Cons of Using a VA Loan?
What you should be aware of though, is that if you are buying a condo, townhome, or CPR (condominium property regime) property, the project will need to be on the VA approved list. Before getting excited about a new listing on market, you should check that it is “approved” with no restrictions. You can do this by asking your agent or using a government link to look it up.
What if it’s Not on the VA Approved List?
If the project is not already “approved,” don’t give up on it just yet. It used to be that getting a building VA approved took about as long as buying a short sale (contrary to its name, short sales used to take on average 6 months to complete). However like short sales, the process has streamlined in recent years, so now an experienced VA lender can get a project approved in under a month!
What Does it Take to Get a Complex VA Approved?
While a savvy VA lending specialist can get a fairly quick approval, it does take the seller’s cooperation and patience to do so. First of all, the seller must be willing to wait for this process. In all likelihood, if the property is new on market, most sellers will first want to work with a ready, willing and able buyer, one with cash or conventional financing where it won’t take those extra steps to close on the transaction. It is important to note that it is not guaranteed that VA will approve the building. This means the seller could potentially delay their sale, only to discover that the VA disapproves the complex due to reasons such as litigation, low reserves, upcoming assessments, etc.
If, however, the seller has no other non-VA offers within the first few weeks, they may consider going with a VA buyer and this approval process. Additionally, the seller will have to provide the buyer’s lender with the condo association documents. This costs an average of about $400 in Hawaii and takes 2 weeks to receive. Sometimes other documents or forms that the developer would need to submit are required to approve a CPR-type project.
If all this falls into place, the VA approves the building (great news for future VA buyers for that complex) and then the lender will process the loan as usual. It could take an extra few weeks for the transaction to complete, but again an experienced VA lender may still be able to close the loan in the same amount of time (about 45 days) because they can expedite every other step in the process.