Elk Springs Filing 9 Lot 76

In this newsletter, I share some helpful mortgage intel about non-warrantable projects/properties: what they are, how they can be financed and some proactive tips for Sellers or Buyers impacted by them. This section was written in collaboration with a friend and local mortgage broker, Teree Johnson.

I am excited to introduce a new section in my newsletters, called Home DIY. Here I will feature some fun and easy home projects that I have taken on that you might also find inspiring. Here, I share how I refinished an heirloom hope chest my dad built in the 1980s with the help of a local carpenter and finish expert.

I am happy to share a recently listed horse property and Adobe-style home on 6+ acres in northern Rifle. I also listed single family home in Castle Valley Ranch, New Castle a few weeks ago and it went under contract in just 3 days! I also had another lot closing in Elk Springs.

As always, I provide current interest rates and a great mortgage rate calculator. Please reach out if I can assist in any way!

Best,

What is a non-warrantable product?

- By Teree Johnson, TLJ Mortgage

In the lending world, a project is considered "non-warrantable" if it does not meet the specific rules and standards set by Fannie Mae, and there are many.

Common items that signify a non-warrantable project:

Past due HOA dues: No more than 15% of the project's total units can be 60 days or more past due on their common expense assessments (HOA dues). This includes both regular monthly dues and any special assessments.
Budget: The HOA budget must either have adequate funding for insurance deductibles and at least 10% allocated to reserves OR have a reserve study dated within the last 3 years.
Repairs: Unfunded repairs exceeding $10,000 per unit, or material deficiencies that could cause system failure within one year, may render the project ineligible.
Owner Concentration: No single entity (individual or corporation) can own more than 10% of the total units (or 2 units in a 5-20 unit project).
Insurance: The maximum allowable deductible for all required property insurance perils is 5% of the master property insurance coverage amount.

Financing Restrictions

If a property or project is deemed non-warrantable, buyers face significant limitations:

Ineligible for Standard Loans: You cannot obtain a conventional Fannie Mae or Freddie Mac loan.
No Government Backed Loans: The property will not qualify for VA, FHA, or USDA loans.
No Conventional Jumbos: Standard jumbo loans are also unavailable for these projects.
No 30-Year Fixed Rates: Essentially, the desired standard 30-year fixed-rate financing is not an option. Buyers would need to consider adjustable rate mortgage (ARM) loans.

The Cost of Non-Warrantable Loans ~ While you can still get a loan for these properties, the terms are generally less favorable:

Higher Costs: These loans typically have higher interest rates and are more expensive to originate.
Shorter Terms: Fixed-rate terms are usually shorter, often limited to 5 to 7 years.
Higher Down Payments: A non-warrantable loan will always require a minimum of 20% to 30% down.
Stricter Qualifying: Buyers will face harder qualifying guidelines than they would for standard loans.

Sara’s Proactive Tips for Sellers and Buyers

To avoid surprises during a transaction, such as termination on the basis of loan availability, which is typically one of the very last deadlines. Teree recommends doing some homework upfront. If there are any concerns, Listing Brokers and Sellers can find out if the condo/townhome complex has any potential to be non-warrantable during the listing process by reaching out to the HOA and asking them to fill out a form called the

Fannie Mae Condo Project Questionnaire (Form 1076). That way, if there are potential issues with non-warrantability, interested Buyers and their lenders can be made aware of it prior to making an offer.

I recently learned about a small condo complex in Carbondale that was deemed non-warrantable because 3 out of the 12 units were owned by one person. I was told by the listing broker that this meant that if a Buyer needed a mortgage, they would have to get an ARM (adjustable rate mortgage) loan. Not all Buyers are comfortable with them. On the flip side, as a seller, if your condo/townhome complex is unwarrantable, it could mean that your pool of Buyers is limited and that could affect the time it takes to sell and ultimately, maybe even the value of your home. As a Buyer, even if you are comfortable with an ARM or a higher interest rate, the issue could impact your selling power down the road, if and when you ever need to sell.

If you would like to learn more or are curious about the warrantability of your condo/townhome project, please feel free to reach out directly to Teree!

Tereé L. Johnson

TLJ Mortgage

Cell: 970.618.5400

Email: tlj@tljmortgage.com

Refurbishing Furniture

My dad built this hope chest for my mom as a wedding present in 1983! It has been a staple in my home in Blue Lake every since. When I was a kid, it sat in our living room with plants on it and unfortunately got some water stains on the top. During a move 5 years ago, one of the legs got pulled off and the particle board in the drawer above it got chipped - its had some wear and tear after 40 years! The top was a veneer (not solid hardwood), so sanding it down and re-staining it unfortunately wasn’t an option. I have painted and furniture myself in the past, but the quality of the paint job didn’t have the professional look I wanted for such a special piece. So, I enlisted the help of local carpenter and finish-work company, JR Finishes & Design to help me refinish and paint it. They picked up the chest and took it down to their shop in Silt where they sanded it down, fixed the broken leg, oiled the inside compartments and drawers and then painted the outside green using a special grade of paint and a professional sprayer. The result was stunning! The paint is a nice, solid even coat all around - no brush strokes. If you like the paint color or the gold hardware I used, links are below! JR’s contact information is also below - next newsletter, I’ll share the work he did when we installed new interior doors throughout my house last year.