Financing and HOAs

Published on February 13th, 2015

Understanding Homeowner’s Associations (HOAs) in Financing a Home

Whether you’re living in a city or a suburb, many homeowners have dealt with a HOA. While people often associate HOAs with something that only comes with condominiums, these Homeowner’s Associations are more common that most realize.

What is a HOA?

HOAs are legally recognized as Common Interest Developments, when associated with attached housing structures like condominiums or town homes. However, those who live in free-standing, single-family homes that are supported by a HOA know that they’ve expanded to suburban living. This started in the 1980s when developers saw a demand for community living, with the added element of harmony.

In these communities, the decided aesthetic is maintained throughout. Rules and restrictions may keep you from having neighbors who (for example) raise a car on cinderblocks in their front yard, or store large recreational vehicles in their driveway for an extended length of time. The HOA may also restrict potentially gaudy additions, and the list goes on. Typically, home paint colors complement one another in these neighborhoods, the landscaping may be similar or may be trimmed similarly at every house, and more. While some people find this to be a controlled approach to living, the benefit is this: an environment where properties must be kept at a high standard can help maintain property values in a community that is supported by a HOA.

While living in a community that has a HOA has one obvious benefit, the downside is that this peace of mind in your investment comes at a price.

What to consider?

If you’ve fallen in love with a home that’s situated in a community with a HOA, the first consideration is price. When shopping for a home, many buyers start with sitting down with a Loan Officer to establish a monthly budget of what they can reasonably afford in a monthly mortgage payment. If you add HOA fees to this, depending on the monthly fee, this could break the budget. For those who have fallen in love with a HOA listing, it’s best to see what financing options are available to you before you dive in and make an offer on the home.

Another factor of living in a community with a HOA is change. For example, if one day you decide that you want to start gardening and find that the best sun exposure is in your front lawn, there may be some major hoops you have to jump through before you start digging. While this may make you feel cornered, it also ensures that everyone in your neighborhood is on the same page and your community remains the pristine setting that often attracts buyers.

When it comes to viewing a property as an investment, buying a home with a HOA can be considered a sound choice for resale. However, it’s always best to start with speaking with a mortgage professional. This will allow you to review your budget, your goals, and go over your unique financial situation, so you can responsibly finance the home of your dreams. If you would like to learn more about buying a home, our team can help. Click here to speak with a member of our Housing Buzz Team today.

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