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There are lots of things that you might expect to pay for as part of your monthly mortgage payment. You have the principal and interest on the loan as well as the taxes and insurance. If your property is located within a homeowners association, chances are, you’ll also have to pay a homeowners association fee.
What’s the purpose of a homeowners association (HOA)? What do HOA fees cover? What are the pros and cons of buying in an area with an HOA? Finally, what questions should you be asking the association before you buy? We’ve got the answers.
Why a Homeowners Association?
If you’re looking at buying a home, one of the advantages of moving into an area with an HOA is that they take care of much of the basic maintenance and service functions associated with owning your home.
A good way to think about this is that you take care of everything on the interior of the property, and the association typically takes care of most things on the exterior of the property.
One thing to be aware of is that since the HOA is taking care of the exterior, they often have regulations regarding the look and feel of the outside of your home. There may be certain things you can and cannot do, such as putting up a fence, a personal pool, etc. It’s something to consider.
So, where are your HOA fees going?
What Do HOA Fees Cover?
Each association has different policies. This is why it’s wise to ask the seller for a list of the HOA rules and regulations. If the seller doesn’t have one available, you can ask for the name of the property management company that oversees the community in order to get more details.
In general, these are some of the costs that can be covered by HOA fees:
- City services: Services such as trash removal, water and sewage are often covered.
- Insurance: This only includes insurance for damage to the outside of the building and the property around it. You still need an individual insurance policy to cover everything inside the condo.
- Lawn care: This usually includes snow removal, gardening and general lawn maintenance.
- Pest control: Many HOAs schedule a monthly inspection from a pest control company in order to avoid pest infestations.
- Maintenance and repairs to the outside of the building: This includes things such as roof leaks, exterior painting, driveway pavement repairs and so on. It also covers the cost of gym or pool maintenance, etc., if applicable.
If you don’t mind paying HOA fees every month and like the convenience of having some labor-free amenities, purchasing a condo or home within a neighborhood association might be the best option for you.
Let’s take a second to talk about the fees.
Who Decides on HOA Fees?
If you’re considering moving into a community with an HOA, one of your considerations should definitely be how much the fees are. But what goes into determining the fees, and who decides on them?
There are some things the homeowners association may not have as much control over as you would think. Property values are experiencing a general upward trend right now. If property values go up over a certain threshold, you’ll have to pay more for insurance for the exterior, and your association will have to raise the dues. A similar effect will happen if the price of certain services goes up due to inflation.
That’s not to say you don’t get any input on what your dues are. HOAs hold meetings at least once a year. You can go to these meetings and make your voice heard. If you want, you can run for the association’s board and help negotiate the prices you pay for the services the HOA provides.
Questions You Should Ask of Your HOA
If you’re looking at getting into a community with an HOA, there are a few key questions you should ask of the association in order to properly compare one community to another.
One of the first things you should ask is what services you’ll be getting for your dues. Some associations have more maintenance commitments and benefits than others.
If you like to cut your own lawn for example, this is also a good time to ask whether you can opt out of services that you ordinarily wouldn’t pay for.
You should definitely ask what the fees are. But it goes a bit beyond that as well. Occasionally, a homeowners association will have a big expense that’s not part of your normal dues. Let’s say the roof on the clubhouse needs to be re-shingled or a pool has to be resurfaced.
Your HOA should collect a certain amount to fund these maintenance projects as part of your normal dues, but if the reserves don’t cover the entire cost, the association may have the community vote on whether there should be a special assessment. You should check into how regular fees and these special assessments are voted on and when they’re due.
Finally, make sure you really check into what the rules are. If you fall behind on your dues because of temporary financial trouble, what powers does the association have? Depending on the way the bylaws are written, it’s not uncommon for the association to have the ability to put a lien on your house. You should also see if they have a way for you to get on a payment plan to get back in good standing.
Whether the home you’re looking at is in an HOA or not, we can help you with your preapproval. If you prefer to do your preapproval work online, check out Rocket Mortgage by Quicken Loans. If you’d like to get started over the phone, one of our friendly Home Loan Experts will be happy to take your call at (800) 785-4788.
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