Topic file 19 of 20
Condos, townhomes and HOAs
When you buy into an association, you buy a share of its budget, its rules and its future repair bills. The documents you receive before closing tell you how healthy that share is, if you know where to look.
Condominiums, many townhomes and a large share of newer neighborhoods come with a homeowners or condominium association. The association maintains shared property, enforces rules and collects dues. For buyers, that means two purchases at once: the unit or home itself, and membership in an organization whose finances and decisions will affect your costs for as long as you own.
Ownership types
In a condominium you own your unit, usually from the interior walls in, plus a share of the common elements such as the roof, hallways and grounds. In a townhouse community you often own the structure and the land beneath it, with an association for shared areas, though some townhomes are legally condominiums. In a housing cooperative you buy shares in a corporation that owns the building and receive the right to occupy a unit. Financing, taxes and approval processes differ for each, so confirm the legal form before you compare prices.
The documents to read
Ask for the governing documents (declaration or covenants, bylaws, rules), the current budget, the most recent financial statements, the reserve study if one exists, recent board meeting minutes, the master insurance policy, and any disclosure of pending litigation or special assessments. Your state may set a review period after you receive them. Minutes are often the most revealing: they show what repairs are being discussed and how the board is handling them.
Dues, reserves and assessments
Dues pay for operations and should also fund reserves for long-lived items like roofs, elevators and paving. A reserve study estimates those future costs and the savings needed. An association with thin reserves may raise dues sharply or levy a special assessment when a big repair arrives. Ask how dues have changed over recent years, whether any assessment is planned, and what share of owners are behind on dues.
Insurance and approvals
The association's master policy covers some or all of the building; you insure the rest, often with a condo unit policy. Lenders and loan programs review condo projects too. FHA and VA have their own approval processes, and conventional loans follow Fannie Mae and Freddie Mac project standards. A project that does not meet them can limit your financing options and future buyers' options when you sell.
Rules
Associations can regulate rentals, pets, parking, exterior changes and more. If you might rent the unit later, work from home with clients, or keep a large dog, read the rules first.
What to read first
Association documents are long, so read them in order of risk. Start with the budget and the reserve contribution, then the last year of meeting minutes, then any notice of special assessments or lawsuits. Next, the master insurance policy, to learn what you must insure yourself. Leave the full declaration and bylaws for last, but check the rental, pet, parking and renovation rules before you remove any contingency. Ask your lender early whether the project meets your loan program's requirements, because a project that does not qualify can change your financing. The guide on HOA documents lists what to request and what to look for.
The questionnaire and the townhouse question
When you finance a condo, many lenders send the association a project questionnaire, often Fannie Mae Form 1076. It asks how many owners are 60 or more days behind on dues, whether the association is in litigation, how many units are investor-owned, how much commercial space the building has and how its reserve and operating funds are controlled. A building safety addendum asks about recent inspections, unfinished repairs, the last reserve study and any current or planned special assessments. The questionnaire guide explains each section and which answers tend to draw extra scrutiny. The townhouse comparison guide covers a common point of confusion: townhouse describes a building style, while condo describes ownership. Many townhouse communities are planned unit developments, where you own the lot and structure, and Fannie Mae waives project review for PUD units. Others are legally condos and are reviewed as condos. Check the deed and declaration before you compare fees or insurance.
How to use this file
Request the association documents as soon as you are under contract, and use the HOA documents guide to read them in order: budget and reserves, minutes, then rules. Read the minutes and budget before the inspection deadline. Add the dues to your monthly payment using the payment worksheet, and ask your lender early whether the project meets your loan program's requirements.
Guides in this file
Co-op vs condo: what you actually own
A condo buyer gets a deed; a co-op buyer gets shares and a lease.
The condo questionnaire: what lenders ask your HOA and why it matters
The HOA's answers can approve or stall your condo loan.
HOA documents to review before you buy
Read the association's paperwork before it becomes your obligation.
HOA fees: what they cover, how they change and how lenders count them
Monthly dues are a share of the association's budget.
HOA reserve study: how to read one before you buy
The reserve study tells you whether today's dues will cover tomorrow's roof.
HOA rules to check before you buy
The rules come with the house. Read them before they become your rules.
Special assessments: what they are and how to spot one before you buy
A one-time bill from the association, usually for a big repair.
Townhouse vs condo: ownership, HOAs, insurance and loans compared
The difference is what you own, not how the building looks.
Warrantable vs non-warrantable condos
The building, not your credit, can be what stops a conventional loan.
Questions buyers ask
What is a special assessment?
It is a one-time charge the association levies on owners to pay for a cost the budget and reserves do not cover, such as a major roof or structural repair. Ask whether any are planned or under discussion before you buy.
Do HOA fees count in my mortgage qualification?
Yes. Lenders include association dues in your monthly housing payment when they calculate your debt-to-income ratio, so higher dues reduce the loan you qualify for.
Sources checked for this page
- CFPB: buying a house
- CFPB: what is a debt-to-income ratio
- HUD: buying a home
- Fannie Mae Form 1076: condominium project questionnaire
Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.