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HOA Fees, Credit Ratings, and More

By Brian Kline | June 16, 2018

Too many people fail to pay attention to the impact HOA fees have on homeownership. HOAs are serious about collecting the fees owed to them. When fees are unpaid, it can have devastating consequences for current homeowners and people looking to buy another home who left unpaid fees at a previous community.

According to the Community Association Institute, HOAs and property management companies collect over $70 billion in HOA payments annually in support of more than 333,000 community associations. The individual monthly fees vary greatly and tend to be highest among condominium owners who need to maintain expensive features like elevators and communities with expensive amenities like swimming pools, gold courses, and tennis courts. Those that only maintain common areas and landscaping tend to be less costly. According to, fees typically range from $200 to $400 per month.

Delinquent HOA Fees Impact Credit Reports

Failing to pay HOA fees can dramatically affect your ability to own a home in several ways. Whether or not your HOA fee is escrowed as part of your mortgage payment or is your independent responsibility, you need to understand the cost and impact before purchasing a home in an HOA community. According to the National Association of Realtors®, in 2016 HOA payments and account status began being reported to the three big credit bureaus.

If you are only delinquent on your payments, it is up to the policy of your specific HOA if the late payments are recorded against your credit score. However, if your HOA places a lien against your property at the county clerk’s office, it not only goes against your credit score but also becomes a public record and clouds the title to your home. Should you try selling your home the lien will also appear on the title report. Of course, this impacts your overall credit score in addition to your ability to sell your current home.

What You Need to Know Before Buying in a HOA Community

Maybe the credit report impact is a good thing and maybe not. These are people that have already qualified for a home mortgage. However, negative points for delinquent HOA payments could make it impossible for these people to move up the homeownership ladder (unable to qualify for a larger mortgage). Before you get in that situation or when looking at homes with HOAs consider these factors:

  • What is the history of HOA fee increases? Have fees increased a little every year or two? Or are they due for a big 10 year bump?
  • What services do the fees cover? Are these expenses you have in your household budget that you’ll no longer have to pay? Or is the HOA fee in addition to your already tight budget?
  • Special HOA assessments can be in addition to regular fees. Does the HOA have an adequate reserve fund for planned costly maintenance/replacement of amenities and necessities?
  • What is the HOAs history of special assessments? How often and how much?
  • How was the reserve fund calculated and when was the calculation last updated? This is usually documented in a “reserve study” estimating how much money should be saved to cover these expenses.
  • Are any new HOA expenses in the planning or discussion stages?

A lot more should be known and considered before buying into an HOA governed community. For instance, how are voting rights assigned? In a community still under development, the developer probably has control of the majority lots and votes. This can make it possible for the developer to making sweeping changes to the rules and fees regardless what the early homebuyers want or anticipated.

Beyond the fees, each HOA creates its own covenants, conditions, and restrictions (CC&Rs). These impact how you are able to use your own property as well as the common areas. Possibly everything from if you can have a flag pole, build a fence, where you can park your vehicles, how many guests are allowed at the pool, and much more.

Joining the HOA is a requirement, not an option. Before buying, you need to know about current fees and CC&Rs, the history, and plans for the future. These will affect your current lifestyle and possibly your future ability to buy another home.

What do your advise homebuyers about HOAs? Please leave a comment.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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