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Tuesday, April 22, 2014

First time buyer – I’m about to get out of the military. Can I use my VA benefits to help buy a home?

Answer – Yes, in fact you can get started o that process before you even leave the service. You will need a Certificate of Eligibility, which you can apply for prior to your separation. In the case of a VA guaranteed home loan, the start is to apply for your VA Home Loan Certificate of Eligibility, which you will need to actually get the loan. With that in hand you can start talking to mortgage reps. Click here to go to the VA Web site page for the complete story on home loans.

The VA benefit that allows service members and veterans to buy homes with nothing down doesn't come without some strings attached. Perhaps the most important one initially is that the home that you are going to try to buy has to qualify for VA financing. Sounds innocuous, but it may severely limit your choices. When a builder is developing a project one of the many paperwork issues that he has a choice to go through is a VA Certification. While this paperwork isn't really onerous, it takes time that many builders just blew off when they were developing condo complexes and site condo subs.

A variation on the condo theme is the site condo, which is a Michigan invention that became popular in the mid 1980’s. Basically developers found in the mid-80’s that they could get through the Michigan’s approval process for condo developments in less than half the time and at less cost than going through a complete subdivision platting process. They decided that they could build homes that were a step beyond detached condos, but which would still fall under the State’s development rules for condos.

The idea of a site condo is that the owners own and are responsible for the little piece of land upon which their home sits and for the house itself (inside and out); but that the plot and house exist within a condo complex which also owns some common areas and requires that the homeowner be a member. Importantly, the “common areas” include the roads within the complex, plus any other areas like playgrounds or parks spaces or even the entrance to the complex (you've all seen the little entrance islands with the sub name on them – the association owns that, too). So, collectively, the owners are responsible for all of those things and for insuring those areas.

For the most part a site condo development is so much like a typical plated subdivision that one can’t tell the difference; until it’s time to repair or replace the roads. In plated subs the roads are the responsibility of the local governmental body – the Township, Village or City. In a site condo complex, it’s the homeowners who are on the hook. That is one big reason to make sure that you check to see if the HOA is collecting and saving money for road repairs in your site-condo sub.

The other things that can be dramatically different are the rules that you may have to live under in a site condo sub. Some site condo HOA’s have very strict rules about what you can and cannot do to your property, especially on the outside. Some go so far as to have committees that must approve any exterior changes r additions and even what colors you can use on the exterior. If you can live with the restrictions that are impose by the site–condo HOA, then don’t buy there in the first place.

Finally, and most important for the VA buyer is that most site condo complexes build in the 80’s and 90’s and even in the early 2000’s were NOT VA certified. The builders just didn't take the time to put in the paperwork. The VA has just recently agreed to a process for certifying Condo complexes that were not certified when built. It is a process that has a cost ($850) and requires some work on the part of the Condo Association, so you may get some push-back on it; however, it is in the best interests of the current owners to open up their complex to this new set of buyers. It does take time too (usually 60-90 days), which may be a problem if you need to get in quickly. Click here to read about what is required to get an existing condo (site condo) complex certified for VA loans. 

The VA also uses an appraisal process that is similar to the FHA process, in that the appraiser is also checking the house to see if there are any health hazards that need attention. Some sellers find both the FHA and VA appraisal/inspection process to be objectionable and thus do not offer those as financing options that they will entertain. 

If you can find a property that yo really like this program can be a great way for a first-time home buyer to get into home ownership. Even if you've had homes before, if you have never used your VA benefits for any of them, you can still use it. Good luck and thank you for your service to our country.

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