Jan 24, 2027 · By Oanh Nguyen · Broker & Loan Officer · Buying
Condos and townhomes are popular with Bay Area buyers. They often cost less than single-family homes nearby, and the HOA takes care of many shared expenses.
But that convenience comes with a monthly bill: HOA dues. And sometimes there's more, like special assessments. These costs affect your monthly budget, your loan qualification and your long-term costs, just like your mortgage payment does.
In this post, I'll explain how monthly dues, special assessments and reserves work, how HOA rules can affect costs, how lenders count dues and how to build HOA costs into your total monthly payment.
This is general education, not legal advice, and not a loan offer. Loan programs, guidelines and eligibility change and depend on lender review and approval.
What HOA Dues Pay For
HOA dues fund the association's shared costs. What they cover varies a lot.
Dues may cover some of these:
- Exterior maintenance: roofs, siding, paint, common walls.
- Common areas: landscaping, lighting, walkways, parking areas.
- Amenities: pools, gyms, clubhouses.
- Master insurance policy for the building or common areas.
- Utilities: sometimes water, sewer, trash or even gas.
- Management fees.
- Reserves for future repairs.
Why this matters: two complexes with different dues may not be as different as they look. Higher dues that include water, trash and exterior maintenance may cost you less overall than lower dues that cover little.
Monthly Dues in Your Budget
HOA dues are part of your monthly housing cost.
Your total monthly housing payment may include:
| Cost | Monthly |
|---|---|
| Principal and interest | $ |
| Property taxes | $ |
| Homeowners insurance (often an HO-6 policy for condos) | $ |
| Mortgage insurance, if any | $ |
| HOA dues | $ |
| Total monthly housing payment | $ |
Your lender can give you estimates for each line. My post on how much house you can afford explains how to set a comfortable budget.
How Lenders Count HOA Dues
Lenders generally include HOA dues in your housing payment when calculating your debt-to-income ratio (DTI). The CFPB explains DTI.
What this means:
- Higher dues mean a higher housing payment, which can reduce how much you qualify to borrow.
- Two homes at the same price can lead to different loan amounts you qualify for, depending on their dues.
My post on how student loans and other debts affect qualification explains how DTI works. Ask your lender to run your numbers with the actual dues for each home you're considering.
Special Assessments
A special assessment is a charge on top of regular dues, often to pay for a major repair or shortfall.
Common reasons:
- Roof or siding replacement.
- Plumbing or structural repairs.
- Rising insurance costs.
- Legal costs or settlements.
- Underfunded reserves.
What to ask:
- Are any assessments approved or under discussion?
- How much is the unit's share, and how is it paid: lump sum or installments?
- When is it due?
- Who pays an assessment approved before closing? That's negotiable in the purchase contract.
Assessments can also affect your lender's review. Ask your lender how a pending assessment might affect your loan.
Reserves: Why They Matter to You
Reserves are money the HOA saves for future repairs and replacements.
- Healthy reserves can reduce the chance of large special assessments.
- Low reserves may mean higher dues or assessments in the future.
What to review:
- The reserve study: an estimate of future repair costs and the funds needed.
- The budget: how much goes into reserves each year.
- Financial statements.
California Civil Code section 4525 lists the documents sellers in common interest developments provide to buyers, including budget and reserve information.
Dues Can Change
HOA dues aren't fixed forever.
- Dues can rise when costs like insurance, utilities or repairs go up.
- Ask about recent increases and whether more are planned.
- Look at the budget for signs of pressure, like rising insurance costs or low reserves.
For your budget: consider a scenario where dues rise. Make sure your budget can handle it.
HOA Rules That Affect Costs
Rules can create costs you might not expect.
- Renovation approvals: some changes require approval, and there may be fees or requirements for licensed contractors.
- Move-in and move-out fees.
- Fines for violations.
- Parking fees or rules.
- Rental rules, if you might rent the unit someday. My post on HOA rental restrictions explains them.
- Insurance requirements: many HOAs require owners to carry their own interior policy.
Insurance in an HOA
The master policy usually covers the building or common areas, depending on the governing documents.
Your own policy, often called HO-6 for condos, usually covers the interior, your belongings and liability. Coverage needs depend on what the master policy covers.
Ask:
- What does the master policy cover?
- What's the master policy's deductible, and could owners be charged a share of it after a loss?
- What does the HOA require owners to carry?
Fees You May Pay at Closing
Beyond monthly dues, buying in an HOA can bring one-time charges. Depending on the HOA, the contract and local custom, these may include:
- Transfer fees charged by the HOA or management company.
- Document fees for the HOA disclosure packet, often paid by the seller, though this depends on the contract.
- Capital contributions or working capital fees, which some HOAs charge new owners.
- Prorated dues for the month you close.
- Move-in fees or deposits.
Ask your agent and escrow officer which fees apply and who pays each one. They'll show up on your estimated settlement statement.
HOA Dues vs. Single-Family Maintenance
A fair comparison between a condo or townhome and a single-family home looks at total cost, not just the dues.
| Cost | HOA home | Single-family home |
|---|---|---|
| Monthly dues | Yes | Usually none (some planned developments have dues) |
| Exterior repairs (roof, paint, siding) | Often covered by dues | Owner pays |
| Landscaping | Often covered | Owner pays or does it |
| Master insurance | Often covered for the structure | Owner's homeowners policy covers the structure |
| Water, trash | Sometimes covered | Owner pays |
| Interior repairs | Owner pays | Owner pays |
| Special assessments | Possible | Not applicable, but large repairs are the owner's cost |
A single-family home may have no dues, but the owner pays for everything. I'll cover maintenance budgeting in an upcoming post.
Reading the HOA Budget
The budget can tell you a lot about future costs. Look for:
- Total income from dues and other sources.
- Major expense lines: insurance, utilities, landscaping, management, repairs.
- The reserve contribution: how much goes into savings each year.
- Changes from last year: big jumps in insurance or repairs can signal future dues increases.
- Any shortfall between income and expenses.
If something is unclear, ask the management company through your agent.
Planned Developments and Townhomes
Not every HOA is a condo building. Many townhomes and some single-family neighborhoods are in planned developments with an HOA. In these communities, owners may be responsible for more of their own exterior maintenance and insurance, and dues may be lower as a result. Read the CC&Rs to see exactly who maintains and insures what. That affects both your monthly budget and your homeowners insurance.
Ask for Real Numbers Early
HOA costs are easy to underestimate in the excitement of finding a home. Before you write an offer, ask your agent for the current dues and any known assessments, and ask your lender to run your numbers with those dues included. Then, once you're in escrow, review the full HOA packet within your contingency period.
HOA Cost Checklist
- ☐ Current monthly dues.
- ☐ What dues cover.
- ☐ Recent and planned increases.
- ☐ Approved or proposed special assessments.
- ☐ Reserve study and budget reviewed.
- ☐ Master insurance coverage and deductible.
- ☐ Required owner insurance.
- ☐ Move, renovation and parking fees.
- ☐ Rental rules, if relevant.
- ☐ Lender has run my numbers with actual dues.
Comparing Two HOA Homes
| Home A | Home B | |
|---|---|---|
| Price | $ | $ |
| Monthly dues | $ | $ |
| What dues cover | ||
| Pending assessments | ||
| Reserve health | ||
| Estimated total monthly housing payment | $ | $ |
| Estimated qualifying impact (from lender) |
Questions to Ask
- What do the dues cover?
- How have dues changed recently?
- Are there any special assessments?
- How healthy are the reserves?
- What does the master insurance policy cover?
- What will my total monthly housing payment be?
- How do the dues affect what I qualify for?
Common Mistakes
- Comparing homes by price alone, ignoring dues.
- Not asking what dues cover.
- Missing a pending assessment.
- Ignoring reserves.
- Forgetting HOA dues in DTI.
- Not budgeting for dues increases.
Key Takeaways
- HOA dues are part of your monthly housing cost.
- Lenders include dues in your DTI.
- Ask what dues cover before comparing complexes.
- Special assessments and reserves affect future costs.
- Budget for dues to rise over time.
A Hypothetical Example
This example is made up to show the process. It is not based on any real home, HOA or buyer.
A buyer is comparing two townhomes at similar prices. Home A has lower dues. Home B has higher dues, but they include water, trash and exterior maintenance. Home A's HOA has low reserves and is discussing a roof assessment.
The buyer's lender runs both scenarios. Home B's higher dues reduce what the buyer qualifies for slightly, but the buyer's own costs for water and trash would be lower. Considering the possible assessment at Home A, the buyer decides Home B is the better overall value.
Frequently Asked Questions
Do HOA fees affect how much I can borrow?
Usually yes. Lenders include them in your housing payment and DTI.
What do HOA fees usually cover?
It varies. Often exterior maintenance, common areas, a master insurance policy and sometimes utilities.
Can HOA fees go up?
Yes. Ask about recent and planned increases.
What is a special assessment?
An extra charge for a major repair or shortfall, beyond regular dues.
Who pays a special assessment when I buy?
It depends on timing and the contract. It's negotiable.
Do I need my own insurance in a condo?
Usually yes, for the interior, belongings and liability. Check the HOA's requirements.
How do I know if an HOA is financially healthy?
Review the budget, reserve study, financial statements and delinquency information.
Are HOA fees tax deductible?
For a primary residence, generally not. Ask your CPA.
What is a capital contribution fee?
A one-time fee some HOAs charge new owners at closing, often added to reserves. Check the HOA documents and your estimated settlement statement.
Can I negotiate HOA dues?
No. Dues are set by the HOA board under the governing documents. You can compare homes and negotiate the purchase price or credits instead.
Do HOA dues go into an impound account?
Usually not. Most owners pay dues directly to the HOA each month.
Should I avoid HOAs with high dues?
Not necessarily. Look at what the dues cover, the reserves and your total monthly cost before deciding.
How I Can Help
As a broker and loan officer, I help buyers compare HOA homes by total monthly cost, review HOA documents for assessments and reserves and run qualifying scenarios with actual dues. Loan approval always depends on lender review and approval.
The Bottom Line
HOA fees are a real part of your monthly cost and your loan qualification. Know what dues cover, check for assessments, review reserves, understand the insurance and plan for dues to rise. Compare homes by total monthly cost, not just price.
Looking at condos or townhomes? Let's build HOA costs into your budget.
Sources
- California Civil Code §4525 (documents provided to prospective purchasers): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=4525
- Consumer Financial Protection Bureau, "What is a debt-to-income ratio?": https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/
- Fannie Mae Selling Guide, B3-6-02, Debt-to-Income Ratios: https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios
- California Department of Insurance, Residential insurance consumer guides: https://www.insurance.ca.gov/01-consumers/105-type/95-guides/03-res/
- IRS Publication 530, Tax Information for Homeowners: https://www.irs.gov/publications/p530
Factor HOA costs into your budget. Call or text me at 408-780-1188, or email onrealtygroup@gmail.com.
Oanh Nguyen · Broker & Loan Officer · On Realty Group, brokered by LPT Realty · BRE #02133991 · NMLS 2020335
Equal Housing Opportunity.
Loan disclosure: Oanh Nguyen, Broker | Loan Officer, On Realty Group, brokered by LPT Realty, BRE #02133991, NMLS #2020335. This post is general education, not a loan offer, rate quote or commitment to lend. Loan programs, guidelines and eligibility change and are subject to lender review and approval.
Disclaimer: This post is general information only, not an appraisal or legal, tax or financial advice; data comes from the public sources linked above, is believed reliable but not guaranteed, and can change at any time.