When buying a home in Minnesota, your mortgage payment is only one part of the total monthly housing cost. If you purchase a property that belongs to a homeowners association, you may also have to pay monthly or annual HOA dues.
These fees can affect how much home you can comfortably afford and may also factor into how a lender evaluates your mortgage application.
Understanding how HOA dues fit into your overall housing expenses can help you set a realistic budget before making an offer.
What Are HOA Fees?
Homeowners association fees are payments made by property owners within an HOA community.
The fees help fund services and maintenance that benefit the community. Depending on the property and association, HOA dues may help cover things such as:
- Common area maintenance
- Landscaping
- Snow removal
- Exterior maintenance
- Shared amenities
- Building maintenance
- Community insurance
- Association management
- Other shared expenses
The amount can vary significantly between properties.
A condominium may have relatively substantial monthly association fees because the dues can cover maintenance of shared areas and portions of the building. A townhome may also have HOA dues that cover specific exterior or community responsibilities.
Do HOA Fees Affect Mortgage Qualification?
They can.
When evaluating a mortgage application, lenders generally consider the borrower’s recurring housing expenses along with other monthly debts.
HOA dues can therefore become part of the overall housing expense used when evaluating affordability and debt obligations.
This matters because two homes with the same purchase price can have very different monthly costs.
For example, imagine two properties have similar mortgage payments:
Home A
- Mortgage payment: $2,000
- HOA dues: $0
Home B
- Mortgage payment: $2,000
- HOA dues: $400
The second property requires an additional $400 every month, which can affect the buyer’s overall housing budget.
How HOA Dues Can Affect Your Debt-to-Income Ratio
Debt-to-income ratio, or DTI, compares certain monthly debt obligations with gross monthly income.
Because housing expenses are an important part of mortgage qualification, HOA dues can affect the calculation used to evaluate a borrower’s ability to manage the proposed payment.
Consider a borrower earning $8,000 per month before taxes.
If the proposed housing costs are already relatively high, adding several hundred dollars in HOA dues can increase the overall monthly obligation.
That may affect the amount of mortgage financing the borrower qualifies for, depending on the complete financial profile and loan program.
This is one reason buyers should not evaluate a property based solely on its listing price.
HOA Fees Can Change Your True Homebuying Budget
A buyer might find a $350,000 condo that appears affordable based on the purchase price.
However, if the property has significant monthly HOA dues, the actual cost of ownership could be considerably higher than expected.
When comparing homes, consider the complete monthly housing expense, including:
- Principal and interest
- Property taxes
- Homeowners insurance
- HOA dues
- Mortgage insurance when applicable
- Other required property-related costs
Looking at the complete picture gives you a more realistic understanding of what each property may cost.
Higher HOA Fees Do Not Necessarily Mean a Bad Property
A higher HOA fee is not automatically a reason to reject a property.
The important question is what the fee provides and whether the total cost fits your financial situation.
For example, an HOA may cover expenses that a homeowner would otherwise need to pay independently.
A condominium association could handle certain exterior maintenance, common areas, snow removal, landscaping, or other services.
Instead of looking only at the monthly fee, compare the total cost of ownership and understand what is included.
Ask What the HOA Fee Covers
Before buying a home with an HOA, ask for details about what your dues actually cover.
Important questions may include:
- What services are included?
- How much are the current monthly dues?
- How often can dues increase?
- Are there additional community fees?
- Are there upcoming special assessments?
- What maintenance responsibilities remain with the homeowner?
- What amenities are included?
- What insurance does the association carry?
These questions can help prevent surprises after closing.
Watch for Special Assessments
Monthly HOA dues are not necessarily the only association-related expense.
Some communities may charge special assessments when additional funds are needed for major repairs, improvements, or unexpected expenses.
A special assessment could potentially create a significant additional cost for homeowners.
Before purchasing a property within an HOA, buyers should review available association information and understand whether there are known or anticipated assessments.
Your mortgage professional and other members of your homebuying team can help you understand which documents should be reviewed as part of the purchase process.
HOA Fees Are Especially Important for Condo Buyers
Condominium buyers should pay particularly close attention to association costs because condo ownership commonly involves shared building and community expenses.
A condo with a lower purchase price is not necessarily less expensive each month than a higher-priced home.
For example, compare:
Condo
- Lower purchase price
- Mortgage payment: $1,700
- HOA dues: $500
Single-family home
- Higher purchase price
- Mortgage payment: $2,000
- HOA dues: $0
The condo may have the lower purchase price but a similar or even higher total monthly housing expense.
That is why comparing monthly costs can be more useful than comparing listing prices alone.
How Minnesota Homebuyers Can Budget for HOA Costs
If you’re considering an HOA property in Minnesota, include the association dues in your initial affordability calculations.
Before shopping, determine a comfortable monthly housing budget rather than focusing only on the maximum mortgage amount you might qualify for.
Then compare potential properties based on their complete monthly expenses.
This approach can help you avoid falling in love with a home that technically fits within a purchase-price range but becomes uncomfortable once HOA dues and other expenses are included.
Review HOA Information Before Making an Offer
Buyers should learn as much as possible about an HOA before committing to a property.
Depending on the community, relevant documents may include:
- HOA budget
- Rules and regulations
- Fee schedules
- Meeting information
- Financial statements
- Reserve information
- Special assessment notices
- Insurance information
Understanding the financial health and responsibilities of the association can be just as important as understanding the home’s purchase price.
Talk With Your Mortgage Professional Early
If you’re considering a condo, townhome, or another property with HOA dues, mention the association fees to your mortgage professional early in the process.
Providing accurate information about the property can help your lender evaluate the complete housing expense and determine how it fits within your mortgage qualification.
This is especially important when comparing several properties with different HOA costs.
A home with a slightly higher purchase price but lower monthly association fees may have a very different affordability profile from a less expensive property with substantial HOA dues.
Conclusion
HOA fees are an important part of the cost of owning a home in Minnesota.
They can affect your total monthly housing expense and may also be considered when evaluating mortgage qualification and affordability. For that reason, buyers should look beyond the purchase price and mortgage payment when comparing homes.
Before purchasing a property with an HOA, understand what the dues cover, review the association’s financial information, check for potential special assessments, and include the fees in your overall housing budget.
Taking these costs into account early can help you choose a Minnesota home that fits your financial goals both at closing and over the long term.
