It's really confusing and I've been finding a lot of misleading answers. The most constructive thing I've found is a document buried on the va website. http://www.benefits.va.gov/homeloans/documents/docs/vap_26-4_online_version.pdf
If you scroll all the way down to page 10, it states that the VA can approve coop loans, but "only a limited number of vendors have expressed interest." I think this means it's up to usaa?
Hi La Vonda,
Sorry for my delayed response. I asked an expert here at USAA and here is what he had to say:
Townhomes are eligible for VA guaranty. Leaseholds and Cooperatives are different. The VA states “Property involving a less than fee simple ownership (i.e., leaseholds, cooperatives, ground rental arrangements) is not eligible for appraisal without prior VA approval of the specific arrangement or project. Submissions to VA Central Office (262A) must include: details of the ownership arrangement, copies of leases or other instruments creating the estate, and recommendations of the VA office of jurisdiction.” That said, the VA guaranty is for only a portion of the loan amount and most lenders have additional requirements and restrictions to reduce risk exposure. Make sure the lender you choose accepts the property type prior to checking with the VA. (VA quote source: VA Pamphlet 26-7, Revised Change 3 Section 10.06)
I hope this helps!