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

It can be overwhelming when you’rebuying a home to consider all the details in play, just the first of which is how much home you can afford. For example, you start with the home itself – size, style, number of rooms, amenities. And then you consider the location – proximity to work, quality of school system, neighborhood vibe.

Then you might need to add another potential consideration, which is whether the home you’re considering 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 within an HOA-run community to help you decide whether it’s 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 found in charge of common-interest communities, such as planned neighborhoods, townhouses and multi-unit apartment buildings or condominiums.

As you might imagine, there can be pros and cons to living in a community run by an HOA. 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. What’s more, the fees typically paid by HOA community residents are also 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. Find out in advance what your monthly share will be to make sure that it fits into your budget. Note that the services your HOA fees cover depend on the area where you live and what amenities come with 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, any potential HOA fees should be calculated into your total monthly costs before you buy a home in an HOA community. You also should be prepared to pay 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 already have paid part of the fees and will prorate them which will be indicated on your Closing Disclosure). You’ll also find out how these fees will be calculated on an ongoing basis as part of your mortgage payment, or if you’re required to pay a lump sum at the beginning of the year.

If you’re looking to get 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, pursuing 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 that your offer on their property is a trustworthy one, and it can improve your chances of having that offer accepted.

Before you decide to buy a home in a community with an HOA in place, you’ll want to check the rules to make sure that they fit your lifestyle. 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.

There can be a wide variety of rules that an HOA community might enforce. Here are a few examples of common HOA rules:

• Structural restrictions: They might require you to have a certain type of fence or make rules about the landscaping, such as no artificial turf. This also might include size and placement caveats for a garage or shed.
• Certain paint colors or other exterior design choices: Often an HOA board will 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 what kind 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, or other gathering areas. The CC&Rs will explain who can use these amenities, and any rules regarding reserving or sharing them.
• Home maintenance and appearance regulations: Weed-filled gardens and tall grass can be a thing of the past with HOA rules designed to keep any home from becoming an eyesore and dragging down real estate property values. They also might require that you keep your vehicles in a garage.
• Paying your 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 to help maintain the property value and livability of the neighborhood or complex. It’s also worth noting that these 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 the layers of who might be in charge. For instance, you might think that an HOA board and the HOA management are the same, but there are a few key differences between them.

HOA Board

The HOA board of directors is made up of volunteers who live in the community and who are elected by other homeowners. They’re the ones who oversee common area maintenance, shared services and other amenities. The board is 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 come ask questions and get updates. They may plan social activities, neighborhood watch committees and other events.

HOA Management

An HOA management company, on the other hand, 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 it can be helpful to have an HOA management company overseeing your community, it comes with an additional fee.

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

Pros

Of course, there are many pros to living in an HOA community:

• You have access to well-maintained common areas and potentially amenities like tennis courts, swimming pools, parks and more.
• 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, there may be 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. You also might not even want all of the amenities that these fees cover, but you’ll still be obligated to pay them.
• Residents can be fined for violating the HOA rules, so it’s important to make sure you have a clear understanding of the rules to avoid paying your HOA even more money.

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 decisions 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, having a solidified financial backing and acknowledgement of your trustworthiness as a buyer provided by a reputable lender can make all the difference in getting a seller to accept your purchasing terms.

Have more questions about real estate and mortgages? Stay in close contact with your real estate agent, and take the time to look through the many resources that Rocket Mortgage offers in our Learning Center.