Buying a House With a Homeowner Association? Here’s everything you need to know

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Although Homeowner Associations get a bad rap for being controlling, and at their worst militant, there are many upsides to living in a community with a homeowners association. If you like the idea of living somewhere clean and orderly, then an HOA neighborhood could be an ideal option for you. 

Before you buy a home that is part of an HOA, it’s essential to understand your responsibilities as a homeowner and what the community expects from you. Although HOA’s often save homeowners some maintenance tasks, living in an HOA community can also carry homeowner obligations. 

If you’re thinking about living in an HOA, here are some essential things you need to know. 

Homeowner Association Fees Vary

HOA fees differ between neighborhoods and can be vastly different even in the same town. According to a study conducted by Trulia, the average HOA fee in 2015 in the U.S., was $331 a month. In states with a lower cost of living, such as Tennesee, the average HOA fee was $194. In comparison, in New York City, the average HOA fee was a whopping $571 per month. 

The biggest determining factor of HOA cost tends to be the amenities that the development offers. For example, a gated community with a clubhouse and a gym are more likely to levy higher HOA fees. In fact, HOA fees can even differ within the same development. This is especially true if there are variations in amenities available to different homes, the square footage, or location. 

Homeowner Association Covenants are Important

Each HOA has its own unique set of rules and regulations. It’s crucial that you ask your potential new HOA what their covenants, conditions, and restrictions (CC&R) are before you make an offer on a home.

In some instances, you may find that the CC&Rs are too restrictive for you. For example, some CC&Rs limit how tall the grass on your property can grow and which types of vehicles you can park on the street. Some even control the color that you can paint your front door, and whether you can have garden decor displayed. 

In addition, if you have plans to rent out your property at any point, it’s crucial that you read the CC&Rs to determine how easy this will be. Some HOA’s restrict short-term rentals, making a vacation rental business impossible. 

Additional Fees May Apply 

Homeowner Associations vary from development to development in their financial management approach. For example, some HOA’s require a large cash reserve to cover any maintenance or legal obligations that may come up. In comparison, other associations rely on special assessments to meet these demands. Special assessments are similar to tax assessments and are used to cover major expenses, such as replacing a damaged roof. Special assessment levies are often thousands of dollars, so it’s crucial to consider this when purchasing your home. 

It’s a good idea to ask the prospective HOA is they have any special assessments planned for a later date, in addition to any they’ve levied on residents over the last several years. This can give you a better idea of what to expect, should anything come up unexpectedly. 

HOA Fees May Affect Your Mortgage Approval 

HOA fees are a regular expense that you have to budget for. Prospective mortgage lenders also take HOA fees into account when deciding how much to loan you. Because of this, high HOA fees may leave you with lower loan approval, causing you to have to reduce the cost of your new home — or make a larger down payment. 

Before you make an offer on a home in an HOA development, you should ask your lender to run the numbers to determine what you can afford. If you don’t have a lender yet, you can use an online mortgage calculator to give you an idea of your monthly mortgage payment, including HOA fees. 

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