If you buy in a community with a homeowners association, a condominium, or a co-op, you'll pay a recurring fee on top of your mortgage, taxes and insurance. It is not a minor line item, and it has a consequence most buyers don't anticipate: it reduces how much you can borrow.

Why lenders count it against you

Lenders assess affordability using debt-to-income ratios — your housing costs against gross income, and all your debts against gross income. HOA dues count inside the housing figure, alongside principal, interest, taxes and insurance.

The arithmetic is unforgiving. Every dollar of monthly HOA fee is a dollar unavailable for principal and interest within the same ratio. A high monthly fee can reduce your maximum loan substantially compared with an otherwise identical home without an association.

This is why two buyers with identical incomes can be approved for very different amounts depending on what they're buying. It also means a lower-priced condo with high dues can be harder to qualify for than a higher-priced house without them.

Our guide to the 28/36 rule covers exactly what belongs in the ratio. When you're running numbers, put the real HOA figure into the calculator's HOA field — leaving it blank produces an affordability answer that doesn't exist.

What the fee actually buys

It varies enormously, which is why comparing fees between communities without comparing what they include is meaningless. Commonly covered:

  • Maintenance of common areas — landscaping, roads, lighting, snow clearance.
  • Amenities — pool, gym, clubhouse, security.
  • A master insurance policy covering the building structure or common elements.
  • Some utilities — water, trash, sometimes heat in older buildings.
  • Exterior maintenance — in many condos, the roof and building envelope.
  • Reserve contributions — savings for large future repairs. The most important item and the least visible.

A condo fee covering heat, water, insurance and the roof may be better value than a lower fee elsewhere covering only landscaping. Compare like with like, and remember that where the association insures the structure, your personal policy is smaller and cheaper — so part of the fee is offsetting a cost you'd otherwise pay directly.

Special assessments

This is the risk that turns an affordable purchase into a difficult one. When a major repair exceeds the association's reserves, it levies a special assessment — a one-off charge to every owner, which can be very large and is not optional.

Roofs, elevators, façades, plumbing risers, and structural repairs are the usual causes. You cannot decline to pay, and unpaid assessments can become a lien against your home.

The critical insight: a suspiciously low HOA fee is often a warning, not a bargain. An association keeping fees down by underfunding reserves is deferring costs, not avoiding them. When the bill arrives it lands on whoever owns the unit — possibly you, shortly after closing.

Read the reserve study

A well-run association commissions a reserve study: an assessment of major components, their remaining life, and whether current reserves are adequate. It is the single most informative document available to a prospective buyer, and most buyers never ask for it.

Look for the reserve funding percentage. A well-funded association can absorb a roof replacement from savings; a poorly funded one will special-assess. Also check when the study was last updated — a decade-old study tells you little.

Request and actually read:

  • The reserve study and current reserve balance.
  • Recent budgets and the fee history — how fast have dues risen?
  • Board meeting minutes for the last year or two. These are where problems surface first, in plain language.
  • Any pending or threatened litigation. This affects both risk and financing.
  • The master insurance policy and its deductible.
  • The CC&Rs and bylaws — rules on rentals, pets, vehicles, and exterior changes.

Many states give buyers a defined review period for association documents with a right to cancel. Use it properly rather than treating it as paperwork.

Lenders scrutinise the association too

Something buyers rarely expect: for condos, the lender underwrites the project as well as the borrower. A financially unsound or poorly managed association can make a unit difficult to finance regardless of how strong you are.

Common problems include a high proportion of investor-owned units, significant owner delinquency on dues, inadequate reserves, pending structural litigation, or too much commercial space. Following several high-profile building failures, scrutiny of deferred maintenance and structural integrity has increased markedly.

Practical consequences: a unit that can't be conventionally financed has a smaller pool of future buyers, which affects resale. If your lender raises concerns about the project, treat that as information about the building, not merely an obstacle to work around.

Fees rise

HOA dues are not fixed. They rise with insurance costs, utilities, labour, and reserve requirements — and association insurance in particular has risen sharply in several regions, flowing straight into dues.

When budgeting, don't assume today's fee. Look at the trajectory over several years and assume continued increases. Unlike your principal and interest, this component of your housing cost has no ceiling.

The bottom line

HOA fees count in your debt-to-income ratio, so they directly reduce what you can borrow — include the real figure whenever you run affordability numbers.

Compare fees against what they actually cover rather than on size alone, and treat an unusually low fee as a reason to inspect the reserves rather than a bargain. Read the reserve study, the budget, and the meeting minutes before committing, and budget for dues that rise faster than inflation.