HOA Fees Explained: What Homebuyers Need to Know Before Buying

When you’re comparing homes, it’s easy to focus on the listing price, down payment, interest rate, and monthly mortgage payment. Then you find a home you love and notice one more number: HOA, $350 per month.

At first, that might not sound like much compared with a $500,000 or $600,000 home. But $350 every month adds up to $4,200 per year, and HOA dues are only one part of the equation.

A homeowners association can affect your monthly housing budget, the rules you live under, the maintenance responsibilities you have, and, depending on the property and loan, how the lender evaluates the transaction. The goal here is not to tell you that HOA homes are good or bad. It is to help you understand what you’re actually paying for before you buy.

A homeowners association, or HOA, is an organization that manages and maintains certain shared aspects of a residential community. Depending on the property and community, the HOA may be responsible for things such as common areas, landscaping, private roads, amenities, exterior maintenance, or other shared property. Homeowners typically pay HOA dues or assessments to fund those responsibilities.

In some communities, membership is mandatory as part of the property’s governing structure. This is particularly common with condominiums, planned communities, and certain planned unit developments.

What Does an HOA Actually Manage?

This depends entirely on the community. One HOA might maintain a swimming pool, clubhouse, fitness center, shared landscaping, private roads, security gates, and exterior portions of buildings. Another might provide relatively few amenities but still charge dues to cover common-area maintenance, insurance, management, reserves, and other operating expenses.

Never assume that a higher HOA fee automatically means better services. The important question is what the fee actually covers.

This is one of the first questions a buyer should ask. HOA dues can pay for different expenses depending on the community’s governing documents and budget.

For example, a condo association may collect dues to help pay for common-area maintenance, building insurance, landscaping, water or other shared utilities, trash services, exterior maintenance, reserve funding, management expenses, and amenities. A single-family home in an HOA may have a completely different fee structure, often covering far fewer shared services.

Example: Two $600,000 Homes

Example: Imagine two homes both priced at $600,000. Home A has an HOA of $0 per month. Home B has an HOA of $350 per month. The purchase price is identical, but Home B carries an additional $350 × 12, or $4,200 per year. Over five years, assuming the dues never change, that comes to $4,200 × 5, or $21,000. That does not automatically make Home B a worse purchase. If the HOA covers services that would otherwise cost you money or time, the fee may provide real value, but you need to know what you’re getting in exchange for that $350. This example uses simplified, hypothetical numbers for illustration only and does not represent actual dues, a guaranteed cost, or a recommendation for any specific property.

Usually, no. The CFPB confirms that condo, co-op, or homeowners’ association dues are usually paid directly to the HOA rather than included in the payment made to your mortgage servicer, and notes that a servicer may be willing to include HOA dues in an escrow account only upon request, which is not the norm.

This creates an important budgeting trap. A buyer may see a mortgage principal and interest figure of $3,200 and think that is the full monthly payment. But the real monthly housing cost could be higher once you add property taxes, homeowners insurance, mortgage insurance where applicable, and HOA dues. The CFPB specifically includes condo and HOA dues among the costs buyers should estimate and add in when determining their total monthly home payment, since these dues can vary widely and affect the home price you can actually afford.

It helps to think about a home as a complete monthly budget rather than just a mortgage payment.

Example: Suppose a buyer has principal and interest of $3,100, property taxes of $650, homeowners insurance of $150, mortgage insurance of $100, and HOA dues of $300. That comes to an estimated monthly housing expense of $4,300. Without the HOA, the buyer might have mentally budgeted around $4,000, so the $300 difference becomes $3,600 per year. The $300 figure here is only an illustration. Actual HOA dues, taxes, insurance, and mortgage insurance vary significantly by property and borrower.

Yes, HOA or association dues can matter when a lender calculates qualifying housing expenses. For conventional loans following Fannie Mae guidelines, association and project dues are included among the components of monthly housing expense used in the debt-to-income calculation.

That means a buyer should not wait until after making an offer to discover that a property carries significant monthly HOA dues, since that figure is not a side note. It is part of what the lender factors into your qualifying numbers.

A Simple DTI Example

Example: Suppose a borrower earns $10,000 in gross monthly income, with other qualifying monthly debts of $1,000, and a proposed housing expense before HOA of $3,000. Without the HOA, that comes to $1,000 plus $3,000, or $4,000, which represents a 40% debt-to-income ratio. Now add a $400 HOA fee. The total becomes $4,400, which becomes a 44% DTI. This example is intentionally simplified, and actual qualifying calculations depend on the loan program, underwriting requirements, income, debts, property, and other factors. The takeaway is that a $400 HOA fee is not just a lifestyle expense. It can also be relevant to the mortgage qualification calculation itself.

Buyers sometimes lump everything into one category of “extra fees,” but these are genuinely different expenses. Property taxes go to the applicable taxing authorities. Homeowners insurance protects against covered property losses and is generally required by mortgage lenders. HOA dues are paid to the homeowners association according to the community’s governing documents.

For condos and co-ops, association fees may also cover certain master insurance or common-area expenses, but owners typically still need their own unit-level insurance. The CFPB specifically notes that condo and co-op owners can have both association-provided coverage for the building and common areas and their own individual insurance needs for the unit’s interior and belongings. Understanding this difference helps you avoid underestimating your total cost of ownership.

A $75 per month HOA may look much better than a $500 per month HOA, but the fee by itself doesn’t tell you whether the community is financially healthy. A lower fee could simply mean fewer amenities, less maintenance included, lower reserve contributions, different insurance arrangements, or different responsibilities placed on individual homeowners instead.

The question is not how low the HOA is. It is what the HOA fee actually pays for, and whether the association is financially prepared for the property it manages. That leads directly into one of the most important concepts in HOA due diligence.

A special assessment is an additional charge imposed by an HOA to fund an expense that may not be covered by the regular operating budget or reserves. This can become a major surprise for buyers who only budgeted for the monthly dues.

Imagine an HOA has a large roof replacement project, and the association’s regular dues have not built up enough money in reserves to cover the work. The HOA could then levy a special assessment against homeowners, subject to the community’s governing documents and applicable law.

Example: Suppose your regular HOA dues are $300 per month, and the HOA then announces a $12,000 special assessment. If the association allows the amount to be paid over 24 months, that works out to $12,000 divided by 24, or $500 per month. For those 24 months, your HOA-related obligation could effectively become $300 plus $500, or $800 per month, a dramatic difference from the original $300. This example uses a hypothetical dollar amount for illustration only and is not meant to suggest that $12,000 is a typical or common special assessment figure. Actual special assessments vary enormously based on the project, the association’s reserves, and local costs. This is why buyers should look beyond the monthly HOA fee alone.

A reserve fund is money set aside by an HOA for future major repairs and replacements. Think about the expensive things a community may eventually need to repair or replace, such as roofs, roads, exterior structures, elevators, pools, clubhouses, plumbing systems, or other shared infrastructure.

A healthy reserve does not guarantee that special assessments will never happen. But understanding the reserve position can give a buyer a much clearer picture of the association’s overall financial condition.

Why Reserve Funding Matters

A community with aging buildings and significant upcoming repairs may require more financial preparation than a newer community with fewer immediate capital needs. That is why a buyer should not judge an HOA solely on whether $200 a month sounds cheap. The better question is what financial obligations could be waiting behind that $200 figure.

This is where due diligence becomes especially practical. Depending on the property and jurisdiction, buyers may have access to HOA documents such as the current HOA budget, financial statements, reserve information or a reserve study where applicable, governing documents, CC&Rs, rules and regulations, recent meeting minutes, information about pending or recent special assessments, insurance information, fee schedules, and notices concerning major repairs or litigation where applicable.

The exact documents and disclosure requirements vary by state and property type, so it is worth asking your real estate agent or the HOA directly what is available for the specific property you’re considering.

Don’t Just Read the HOA Fee

Look for evidence of what the HOA is actually dealing with day to day. For example, a listing might show HOA dues of $275 per month, but the meeting minutes mention a roof replacement project under consideration. That $275 figure suddenly deserves a closer look before you assume it will stay the same.

HOA ownership is not just about money. It can also come with rules. Depending on the association, rules may address exterior paint, landscaping, fences, parking, pets, noise, short-term rentals, home businesses, leasing, exterior renovations, solar installations, and holiday decorations. This is one reason buyers should read the governing documents before buying, not after.

Example: A buyer plans to purchase a home specifically because they want to convert the garage into an additional living space. They find the perfect property, the mortgage works, and the inspection looks good. Then they discover HOA rules or local requirements that restrict the planned modification. The problem is not necessarily the HOA. The problem is that the buyer made the purchase decision before checking whether the property could actually be used the way they intended. This example is illustrative only and does not represent every HOA’s rules or every buyer’s experience.

This is particularly important for buyers who have a specific vision for their home. Ask yourself honestly whether you can live with the association’s rules for the next several years, not just at move-in.

If you have large dogs, check the pet rules closely. If you plan to rent the property later, check the leasing restrictions. If you want an EV charger, check the applicable installation rules. If you want to remodel the exterior, check the architectural approval requirements. If you want to use the property as a short-term rental, check whether that is permitted at all. Don’t assume that because you own the house, you can automatically make every change you want.

For condos and certain planned communities, the lender may need information about the project itself, not just the individual borrower. This matters because the lender is evaluating the collateral and, in some cases, the financial and operational condition of the project as a whole.

Fannie Mae’s current project standards explain that mortgages secured by units in condo, co-op, and PUD projects are subject to project eligibility requirements, and lenders must determine whether the project meets applicable requirements. Fannie Mae’s Lender Letter LL-2026-03 introduced several updates to those standards, each with its own effective date: a 15% reserve allocation requirement for Full Review applies to applications dated on or after April 1, 2027, while Limited Review was discontinued for applications dated on or after March 8, 2026, which is a reminder that these requirements can and do change over time.

This means a buyer can have a strong personal financial profile and still encounter additional questions related to the property or project itself.

Why This Matters to Buyers

Example: Imagine a borrower with excellent credit, stable income, and a strong down payment, who is purchasing a condo in a community with complicated project issues, such as underfunded reserves or unresolved insurance questions. Even with a strong personal financial profile, this buyer may still face additional underwriting or project-review considerations tied to the property itself rather than to their own finances. This example is illustrative only and does not represent every condo purchase or a guaranteed underwriting outcome. The lesson is that mortgage approval is not always just about the borrower. The property can matter too.

HOA dues can influence how buyers evaluate a property, but that does not simply mean high HOA equals bad resale. The relationship is more complicated than that.

A community with higher dues may offer better amenities, stronger maintenance, better common areas, security features, or additional building services. A buyer may consider those benefits worth paying for, while another buyer may prefer a lower monthly obligation instead, even if it means fewer amenities.

Compare Total Cost, Not Just Sale Price

Example: Home A is listed at $550,000 with $600 in monthly HOA dues. Home B is listed at $575,000 with $100 in monthly HOA dues. Home B costs $25,000 more upfront, but the HOA difference between the two is $500 per month, or $6,000 per year. Over five years, that difference comes to $30,000, assuming the dues remain unchanged. This does not tell you which house is the better investment on its own. It illustrates why purchase price alone is not enough for an apples-to-apples comparison between two properties. This example uses simplified, hypothetical numbers for illustration only and does not represent a recommendation for either property.

Yes. HOA dues are not necessarily fixed forever. Associations may change regular assessments as operating costs, insurance, maintenance requirements, reserves, or other expenses change, subject to the governing documents and applicable state law. That means a fee of $250 per month today could become $300 per month or another amount entirely in the future.

There is no universal annual HOA increase that applies everywhere, so rather than predicting a specific number, it is more useful to review the association’s history, budget, reserves, and any planned projects before you buy.

This deserves careful wording, since consequences vary by state and by the specific governing documents involved. Unpaid HOA assessments can lead to late fees, collection actions, legal costs, liens, and, in some circumstances and jurisdictions, potential foreclosure proceedings.

This is not necessarily an inevitable outcome in every case, and the exact process depends heavily on where the property is located and what the governing documents allow. The point is that HOA dues represent a real financial obligation, not an optional subscription, and buyers should understand the consequences of nonpayment before agreeing to the association’s terms.

There is no universal winner here. An HOA may make sense if you value shared amenities, community maintenance, landscaping services, exterior maintenance, consistent neighborhood standards, or shared infrastructure that you would otherwise have to manage yourself.

A non-HOA property may make more sense if you value greater control over your property, fewer community restrictions, more flexibility for renovations, no recurring HOA dues, or simply fewer association-related decisions in your day-to-day life. The right answer depends entirely on what you personally value.

Before making an offer on an HOA property, it helps to work through a few categories of questions.

On the financial side, ask what the current HOA dues are, how often they have increased historically, whether there are any pending special assessments, how healthy the HOA reserves actually are, and what major projects are planned for the near future.

On the property side, ask exactly what the HOA maintains, what insurance the association carries, and what you will personally be responsible for maintaining as the individual owner.

On the lifestyle side, ask whether pets are restricted, whether rentals are restricted, whether there are renovation restrictions, whether there are parking rules, and whether there are restrictions on home businesses or short-term rentals.

On the mortgage side, ask how the HOA dues will affect your qualifying housing expense, whether the property or project requires additional lender review, and whether there are property or project issues the lender will need to evaluate before closing.

Example: Home A has a purchase price of $500,000, HOA dues of $150 per month, estimated property tax of $500 per month, homeowners insurance of $150 per month, and mortgage principal and interest of $2,900 per month, for an estimated total of $3,700 per month. Home B has a purchase price of $490,000, HOA dues of $500 per month, estimated property tax of $500 per month, homeowners insurance of $150 per month, and mortgage principal and interest of $2,840 per month, for an estimated total of $3,990 per month. Home B is $10,000 cheaper to purchase, but the estimated monthly housing cost is about $290 higher. Over five years, ignoring changes in taxes, insurance, mortgage balance, HOA dues, and maintenance, that comes to $290 × 60, or $17,400. This does not mean Home A is automatically the better financial decision. It demonstrates why buyers should compare the complete cost of ownership rather than just the listing price. This example uses simplified, hypothetical numbers for illustration only and does not represent actual costs for any specific properties.

Before committing to an HOA property, it is worth asking your mortgage professional directly what HOA amount they are using in your qualifying calculation, whether the HOA changes your estimated monthly housing expense, whether there are any property or project requirements that need to be reviewed, whether there are documents needed from the HOA, and whether a special assessment or other project issue could affect the financing process.

These questions help separate two different issues that are easy to blur together: whether you can personally afford this property, and whether this specific property can qualify for the loan you’re applying for. Both matter, and they are not always the same question.

An HOA fee is not automatically a bad thing. It can pay for services and maintenance that would otherwise become your own responsibility. But a low HOA fee is not automatically a bargain either.

Before buying, look at the full picture: the monthly dues, what they actually cover, the association’s financial health, any special assessments, the community’s rules, the property’s condition, and the mortgage impact, all together rather than any single figure in isolation. A $200 HOA with strong reserves and well-maintained amenities could genuinely be more attractive than a $75 HOA facing major repairs it hasn’t planned for. And a $500 HOA may be completely reasonable for one buyer and completely wrong for another.

The goal is not to find the home with the lowest HOA. The goal is to understand what the HOA costs, what you receive in exchange for that cost, and whether it fits your finances and your lifestyle.

• CFPB, Are condo/co-op fees or homeowners’ association dues included in my monthly mortgage payment?
• CFPB, Your mortgage calculator may be setting you up for a surprise
• U.S. Census Bureau, Condo or Homeowners Association Fees Topped $500 Monthly for About 3 Million Households
• Fannie Mae, Lender Letter LL-2026-03: Updates to Project Standards and Property Insurance Requirements

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This article is for educational and informational purposes only and does not constitute financial, mortgage, legal, tax, insurance, or real estate advice. HOA fees, assessments, rules, disclosures, insurance requirements, project eligibility, and enforcement procedures vary by property, association, state, local jurisdiction, loan program, and governing documents. Examples and dollar amounts in this article are hypothetical illustrations only and are not quotes, guarantees, or predictions of actual costs. Mortgage qualification and property eligibility are determined based on the borrower’s individual circumstances, applicable underwriting requirements, and the specific property or project. Buyers should review the HOA’s governing and financial documents and consult appropriate licensed professionals before making a purchase decision.

Duc Pham, Mortgage Broker | NMLS# 844897 | 408-600-1900 | dp@wonderrates.com
Wonder Rates, Inc. | NMLS# 1518655 | DRE# 02047445 | DFPI# 60DBO-59134
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