HOA: What It Means And What To Know About Living Under One

It’s important when buying a home to consider all the details, the first of which may be how much home you can afford. Also important to consider is the home itself – size, style, number of rooms and amenities – as well as the location, proximity to work, the quality of the school system, and the neighborhood vibe.

Yet another important factor to weigh – and one sometimes forgotten – is whether the home you’re looking at would require you to join a homeowners association.

Let’s take a look at what an HOA is, how it works and what you need to know about living in an HOA-run community before deciding whether a home connected to an HOA is right for you.

Homeowners associations – HOAs for short – are private organizations that oversee the management of some residential communities. HOAs establish sets of rules and regulations called bylaws for those living in the community to follow. They’re most often used to govern common-interest communities, such as planned neighborhoods, townhouses and multiunit apartment buildings or condominiums.

As you might imagine, living in a community run by an HOA can have its pros and cons. While the group’s governance might prevent you from doing exactly what you want with your property, the rules set in place are designed to preserve the neighborhood and help all the homes maintain their property values. Furthermore, the fees that HOA community residents typically pay are used to maintain the common areas and keep the entire neighborhood appealing.

As mentioned above, if you live in an HOA community, you’ll usually need to pay fees. These can vary widely depending on the area, the amenities that are included and whether any special assessments have been conducted in the event of a local emergency.

Before buying any home, find out what your monthly HOA fee will be so you can ensure it will fit into your budget. Note that the services your HOA fees cover depend on the area where you live and the amenities of the community. Here are some examples of what might be included:

• Trash pickup
• Landscaping
• Community gym, pool or common areas
• Security
• Maintenance and repairs

Again, calculate any potential HOA fees into your total monthly costs before buying a home in an HOA community. You also should be prepared to make your initial payment at closing; your lender will let you know how much you need to have as part of your closing costs (your seller may have already paid part of the fees and may be planning to prorate them, which will be indicated on your Closing Disclosure). You’ll also learn how these fees will be calculated on an ongoing basis as part of your mortgage payment, or whether you’re required to pay a lump sum at the beginning of the year.

If you need a clearer sense of how much money you’re actually going to be working with before buying a house, especially if you’re anticipating having to pay for HOA fees, a Verified Approval through Rocket Mortgage^® can help. Not only can this help you solidify your budget, but it can also provide prospective sellers with a level of confidence in knowing your offer on their property is a trustworthy one, which improves your chances of having your offer accepted.

Before you decide to buy a home in a community with an HOA in place, you’ll want to check the HOA rules to make sure that they fit your lifestyle, as sometimes there are fines for breaking rules. The HOA board that runs your community will include its rules and regulations in a Declaration of Covenants, Conditions and Restrictions, known as CC&Rs.

An HOA community might enforce a wide variety of rules. Here are a few examples of common HOA rules:

• Structural restrictions: The HOA might require you to have a certain type of fence, or the HOA might make rules, such as disallowing artificial turf, that pertain to the landscaping. Other structural restrictions might include size and placement caveats for a garage or shed.
• Specified paint colors or other exterior design choices: An HOA board will often require you to submit your paint colors for approval. The goal is to make sure no one chooses a hue that’s too garish or that doesn’t blend with the overall neighborhood aesthetic.
• Noise level restrictions: Worried about your neighbor mowing their lawn too early on a Saturday or the teens next door congregating to play basketball until midnight? HOA rules are designed to make sure everyone can live in harmony. For instance, if residents ever get too noisy, it’s often your HOA’s responsibility to issue warnings or even fines to those who can’t keep the volume down.
• Pet regulations: Backyard chicken coops might be all the rage in some urban areas, but not everyone enjoys the farm-like atmosphere. HOA rules might include limitations on the type of pets and how many pets or animals you can have.
• Rules for neighborhood or building common areas: Some HOAs might have pools, parks, community centers, tennis and basketball courts and other gathering areas. The CC&Rs will explain who can use these amenities and any rules that pertain to reserving or sharing them.
• Home maintenance and appearance regulations: Weed-filled gardens and tall grass may cease to exist thanks to HOA rules designed to keep any home from becoming an eyesore and dragging down real estate property values. Home maintenance and appearance regulations might also require that you keep your vehicles in a garage.
• On-time payment of monthly HOA fees: You’ll find out exactly how much you need to pay and when you need to pay it. And there’s no shirking this duty: If you don’t pay your HOA fees, you might end up with a lien or encumbrance against your house, which can make it hard to sell when the time comes.

While these rules and regulations might seem overly instructive, they’re useful for maintaining the property value and livability of the neighborhood or complex. It’s also worth noting that these guidelines will apply to renters if you’re able to have a rental home in the community.

If your home is part of an HOA community, it’s important to understand who’s in charge. An HOA board and the HOA management, although somewhat similar, have a few key differences we’ll review next.

HOA Board

The HOA board of directors consists of volunteers who live in the community and are elected by other homeowners. They’re the ones who oversee common area maintenance, shared services and other amenities. The board members are also responsible for collecting the HOA fees, administering the reserve fund and enforcing the community CC&Rs.

As you become more at home in your community, you might consider becoming one of these volunteers. Most HOA boards hold regular meetings where residents can ask questions and get updates. The HOA boards may plan social activities, neighborhood watch committees and other events.

HOA Management

An HOA management company, different from an HOA board, is a professional third-party firm that helps an HOA board fulfill its duties. If your community has an HOA manager, the board typically ends up being relegated to a decision-making role. While an HOA management company overseeing your community can be helpful, it comes with an additional fee.

If you’re seriously thinking of purchasing property in an HOA community, you may want to consider some additional factors. Here’s a balanced view to help you decide.

Pros

Naturally, living in an HOA community has some advantages. For example:

• You have access to well-maintained common areas and potentially amenities like tennis courts, swimming pools and parks.
• The HOA may handle exterior repairs and services for homeowners, such as keeping the streets clear and sidewalks shoveled.
• No more having an awkward confrontation with your garage band neighbor: HOAs take care of and mediate neighborly or community disputes.

Cons

Despite these benefits, you may encounter some downsides – particularly if your preferred homeownership experience is different than that of your neighbors. Consider these potential impacts:

• The rules on exterior design, pets, street parking and other concerns can be restrictive.
• Some HOA fees are expensive, and they can change without warning. Also, if you don’t want all the amenities that these fees cover, you’ll still have to pay the fees.
• Residents can be fined for violating the HOA rules, so it’s important to make sure you have a clear understanding of the rules. Otherwise, you may end up paying your HOA even more money.

Let’s take a look at some of the frequently asked questions about homeowners associations.

What is the purpose of an HOA?

A homeowners association, or HOA, is in charge of overseeing the management of certain residential communities. HOAs maintain sets of rules and regulations, such as noise level restrictions, the upkeep of amenities and home appearance.

What’s usually included in HOA fees?

While what’s included in HOA fees will vary depending on property location and other factors, fees often include trash pickup, landscaping, community amenities, security, maintenance and repairs.

How much do HOA fees cost?

The cost of HOA fees varies significantly depending on location, amenities provided and more. On average, HOA membership fees for single-family homeowners are about $200 – $300 per month. When purchasing a home, it’s important to factor your HOA fees into your budget so you know you can afford this regular payment alongside your other recurring expenses.

What happens if I don’t pay my HOA fees?

If you’re a member of a community with an HOA and don’t pay your fees, you’ll likely face an additional late fee. If you continue to not pay your HOA fees, you could face more significant consequences, such as a lien, lawsuit or even foreclosure.

Having an HOA can be a boon to a homeowner, making your neighborhood more livable and enhancing your property value. Make sure you’re well-informed about what your fees include and how you can interact with the HOA board if you have questions or concerns. Deciding whether a property with an HOA is right for you is just one of many choices you’ll make on your buying journey.

Before you begin shopping for homes in an HOA community, it’s also wise to pursue Verified Approval. When you’re ready to make an offer on a home, a reputable lender solidifying your financial backing and acknowledging your trustworthiness as a buyer can make all the difference in a seller accepting your purchasing terms.

Are you ready to take the first step toward buying a home? Take action and start your mortgage application today with the Home Loan Experts at Rocket Mortgage.