Until this past month, several factors in Michigan’s housing market have meant that veterans in our state have been forced to use conventional financing (instead of VA programs) when purchasing a single family home here. Worse, many have ended up not qualifying for a purchase because of the down payment requirements with conventional lending. Many have also lost out to other bidders because sellers don’t want to wait for VA approvals when others are ready to purchase with conventional financing or cash. Why was this happening? The VA interpreted single family homes in site condo developments here in Michigan as “condos” in their processing protocols. This triggered additional reviews that delayed and often eliminated VA financing for such homes…until now. After more than a year of educating government officials about the issue, last month the Veterans Administration (VA) issued a local deviation in their rules for the entire state of Michigan. Now ALL single family homes here, whether built in site condo developments or not, are being treated as traditional single family homes in their loan processing guidelines. Veterans in Michigan can now fully leverage their earned benefit!
The Michigan Condo Act allows developers a more streamlined option for platting and developing property for both traditional multi-family condominium projects and single family homes. Because of the more streamlined process, it is estimated that some 90 percent of all single family homes now built in Michigan are actually built on property organized as a site condo development. And, for all practical purposes, these homes have the same characteristics as single family homes built on traditionally platted property.
Back in 2009, at the urging of your state association, the FHA recognized Michigan’s unique development law and modified its lender’s guidance to remove “condo” rules for single family homes purchased in developments legally organized as site condo developments under the Michigan Condo Act. The legal structure for the VA’s programs are somewhat different than the FHA and this is what caused the VA’s hesitancy in recognizing our states unique development structure.
Until now the VA had suggested that veterans wanting to purchase a single family home built in a site condo development should seek case assistance from the VA to work out approval. This, to some extent, worked when many parts of our state were in a “buyers-market.” But as more and more areas of the state have seen the market flip to a sellers-market, sellers don’t wait if a buyer has financing challenges or there are questions that have to be resolved. There are other buyers in line and ready to purchase through conventional means. This was the key argument for change that your state and national association staff had made with the VA.
The HBA of Michigan has a number of key lenders as members and Chemical Bank was instrumental in providing illustrations of real-life cases that negatively impacted veterans. Here are a few that were shared with the VA:
“Recently I have had a disabled veteran get approved for financing but