Can Buying in an HOA Affect Your Chances of Buying a Home?
Some folks love a community that has gates, rules and a standard for residents to live by (rules). Others, not so much. Though, if you're looking in an HOA community, remember that those fees will count towards your maximum loan limit:
Can Buying in an HOA AffectYour Chances of Buying a Home?Homeowners Associations (HOA) ... and the fees/dues associated with them ... come in all sizes, shapes, and forms ...While many Chicagoland properties are not associated with any Homeowners Association (HOA), many ... especially those built after or during the 1980's ... are likely to lie within a subdivision with an established HOA - Homeowners Association.These Associations usually provide commonly owned facilities or services for the benefit of ALL property owners within the Development.Some examples of amenities and services supported by Homeowners Associations/Fees are:
- Parks
- Pools
- Tennis Courts
- Marinas
- Clubhouses
- Recreational Facilities
- Signs
- Lawn Care/Snow Removal
- Retention Ponds
- Walking Paths
- More ...
The cost of maintaining these facilities is shared among the Association's homeowners. Homeowners pay fees or dues to cover these costs by monthly, quarterly, or annual payments to the Association.Whatever the frequency of payments made to the Association ... when it comes time to seek financing to buy (or Refinance) within an HOA, a monthly cost is calculated for Mortgage Qualifying Purposes. In the case of Chicagoland Condominium or Townhouse Associations, the dues are typically paid monthly. Potential homebuyers should be aware, some HOA fees/dues can be fairly substantial.It only stands to reason then: Mortgage Lenders must factor Association dues into a decision to Approve or Deny a mortgage ... even though Association Dues are paid separately from your Mortgage Payment.Many potential mortgage clients are unaware or caught off-guard regarding this fact:Homeowner Association dues/fees are treated by Mortgage Underwriters just like Real Estate Taxes, Homeowners Insurance, or Private Mortgage Insurance are. Each of these various sectors of owning property is counted as a housing expense when Approval for Mortgage financing is sought.To showcase how this can affect a Mortgage Approval and monthly Mortgage Payments, consider the following comparison between a purchase of two (2) similar properties.Borrower #1: Buys a home of the same Sales Price as a Borrower #2, but ... the property Borrower #1 purchases is NOT located within a Homeowners Association and has NO Association Fees.As a result: Borrower #1 will have a monthly housing payment lower than Borrower #2 because they will not be paying a monthly HOA fee.Borrower #2: Because of the Homeowners Association associated with the property they hope to buy ... and the fees they will need to pay, Borrower #2 must:
- Have a higher monthly income in order to qualify for the payment that includes the HOA fee
OR Consider other options:
- Consider lower-priced homes in order to be able to qualify for a Mortgage/Monthly Payment that includes an HOA fee
- Consider same-priced property that does not lie within an HOA or are unaffected by HOA fees/dues
When a home being considered for purchase lies within a homeowners Association, it can affect more than the periodic HOA fees/payment you make as a Homeowner. It can also determine whether you can financially qualify to purchase the home.Good communication and ongoing dialogue between all parties ... Borrower (Buyer), Agents, and Mortgage Originator, etc., is vitally important during any property search, but especially in these more unique scenarios.Each helps you secure the information and guidance needed to make sound decisions regarding differing property and financing. This is even more important when a Homeowners Association and accompanying dues come into play.Thoroughly discussing all the options you have (both financially and property-wise) with your mortgage and real estate professionals prior to viewing homes will make for a much more fluid, less stressful home buying experience.
* When in need of Mortgage info or service when buying (or refinancing) a home in Will County or elsewhere in Chicagoland, contact me. I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:Gene MundtMortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI LicensedAmerican Portfolio Mortgage Corp.NMLS #175656Direct: 815.524.2280Cell/Text: 708.921.6331eFax: 815.524.2281
Gene Mundt
Mortgage Originator - NMLS #216987
IL Lic. #0006220 - WI License
NMLS #175656
Gene Mundt, Mortgage Originator, 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking: #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including: The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin.
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