Many homes, condos and townhomes are part of a homeowners association. Otherwise known as an HOA, the group helps manage your development. HOAs are supposed to help keep the development looking good and running smoothly.
Most homes, condos, and townhomes within an HOA have shared areas, known as common areas, that everyone within the community can use. In exchange for use of the areas, each homeowner pays HOA fees. All homeowners are also subject to the HOA rules.
Living in an HOA community can be beneficial, but there are some things you should consider before buying.
Why Choose an HOA?
First, let’s consider why you’d consider an HOA. While each association differs, you typically get:
- Basic exterior maintenance and repairs
- Lawn care
- Snow removal
- Repair and maintenance of all common areas
- Extensive repairs, such as roof replacement or siding repairs
Keep in mind that if you buy a single-family home in an HOA, you won’t get the exterior maintenance and repairs as a part of your HOA. Instead, you get shared areas, or possibly a gated community. Each HOA has documents that detail what they include/offer residents.
What You Should Know About HOA Fees
Even if everything the HOA offers sounds appealing, you should know what to expect with your HOA fees:
- They may change – Just because your HOA dues are one price now doesn’t mean they won’t change in the future. You can’t predict how much or when they may change. Associations change the fees when their reserves run low due to excessive repairs/maintenance.
- You may pay a special assessment – Some repairs don’t fall under the general HOA umbrella. For example, if the entire unit needs a new roof, the HOA may call a special assessment. The amount could be rather costly, depending on the extent of the necessary repairs.
- You pay for every amenity – If you live in an HOA, you pay the same fees as everyone else, regardless of whether you use the amenities. For example, of the development has a pool but you don’t use it, you still pay the monthly fee for it. There’s no getting around it.
- You still need insurance – Don’t assume the master policy the HOA carries covers your home. Even if you live in a condo or townhome, you still need your own insurance. The HOA insurance covers common areas and certain parts of your home’s exterior. You need insurance for all of the areas that the HOA doesn’t cover, especially your home’s interior and personal belongings.
The Downside to HOA Fees
Yes, paying HOA fees is a downside itself, but there is one other downside you should know about – the rules. HOAs have strict rules. You must abide by them or you risk getting fined. The rules for each association differ as they each set their own.
You may see rules that govern:
- The types of animals you can have
- The type of fence you can have
- Whether or not you can have a pool or shed
- How you can use your home or unit (commercial use)
- What renovations you can and cannot make
Keep in mind that lenders figure your HOA fees in with your monthly payment too. It affects your debt-to-income ratio and your ability to qualify for a loan. If they are high enough, it could make it hard to get the loan approval you want.
Before you choose a community, make sure you’ll use the amenities and that you agree with the rules. Don’t just fall in love with the home; make sure you love the community too. If you have to pay extra to live there, make sure it’s an area you want to spend time and don’t mind spending your money on.