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Real Estate FAQ’s | What Are HOA Fees?

If you have never lived in a condominium or townhome community, you may not be familiar with HOA Fees. HOA is the Home Owners Association. Now, you can certainly have HOA fees in single family communities. They will just vary on what they are for versus what HOA fees cover in a condominium. Let’s review the major HOA fees as they relate to a condominium:

• Exterior Fire and Liability Insurance — Heaven forbid, the building ever catch on fire, part of your HOA fees pay for the insurance policy on the building itself. Almost ALL condominium HOA’s require an owner to carry an additional policy on their specific home, its contents and for liability.
• Reserve Fund — Imagine each month if you own a home, and you put away a small amount of your earnings to have a “slush fund” to repair the roof, or the water heater goes out, etc. Well in a condominium building, the HOA establishes a Reserve Fund for the same purpose, but to cover items that the entire building and it’s owners use. So, items here could be re-finishing the pool or pool deck surface; replacing the roof on the building; new lobby furniture or carpet are some of the items. The HOA does an extensive future budget and determines how much these items will cost to replace, how long they will last, and then calculates how much money needs to be in the Reserve Fund to handle such expenses. Again, in a single family home, this would be where a good budge person would be putting a few dollars away each month for such things.
• Security and/or Concierge — Not all condominium buildings have a 24-hour Concierge desk in the lobby, but most newer communities do. They will also have varying levels of security from sophisticated camera and key access systems to an actual security office that walks and patrols the property. These expenses are covered in your HOA fees.

After these items, other things can be included in the HOA monthly fee, depending on the building. These can include:

• Internet Service
• Water & Sewer charges
• Gas (usually for gas cooking)
• Garbage
• Pest Control (common areas of the building)
• Exterior Maintenance (this is usually the exterior of the building, and areas like garage)
• Fitness Center, Pool, Movie Theater
• Landscape Maintenance (Gardens, pool landscaping, etc.)

As you can quickly see, it all adds up! But if you started to figure what it would cost YOU to maintain a pool, pay for garbage service, monthly Internet, pest control…it can easily be more for a single family home than in a condominium.

When you are purchasing a condominium or a single family home, be sure to ask your real estate agent about any HOA fees, as well as any Initiation fees, also called Capital Contributions. You will also want to give this information to your lender to figure in the overall cost of your monthly mortgage.

Real Estate FAQ’s –What Are HOA Fees?

Why Do I Have to be Pre-Approved With A Lender?

I’m often asked this question by BOTH first time home buyers as well as someone who has purchased a home before.  Let’s look at this.

You might want to spend $175,000 or $375,000 on your new home. But once you have reviewed the payments with your Lender, you might find that the payment is MORE than you want to pay, even though your income, debt and assets allow you to borrow this amount. The last thing I want to do is be showing you homes, and then you get your pre-approval and find out it’s more than you want to spend. Now you have your heart set on that home or condo, but it’s more than you want to spend.

Another reason for a loan pre-approval is to find any surprizes that might be hidden on your credit report that you don’t know about. You would be amazed…that one credit card bill you did not pay off, or a medical bill that you let go….any number of little items can quickly become a “landmine” that could quickly blow up your real estate purchase. Let’s not let that happen.

Lastly, real estate is again moving, and sometimes at break neck speed. And to get your offer on that home or condominium, we need to be ready to make our offer look the best. And a pre-approval letter attached to your offer can do just that.

Real Estate FAQ’s — Why Do I Have to be Pre-approved With A Lender?  Because you want to buy a house!