Are HOA fees included in the mortgage payment?
Usually not. A condo fee, which the loan forms call HOA dues, is a separate bill that you pay to the association.
The payment you send your mortgage servicer covers principal and interest, plus mortgage insurance if your loan has it. Property taxes and homeowners insurance are in it when there’s an escrow account. The lender still counts the condo fee when it decides how much you can borrow.
What’s in the Mortgage Payment If the Condo Fee Isn’t?
Principal and interest are always in the payment. Mortgage insurance is too, if your loan carries it. Property taxes and homeowners insurance are in it only when the loan has an escrow account, and the Consumer Financial Protection Bureau points out that some loans don’t.
The condo fee goes to the association. Can you ask to have it added to the mortgage payment? The CFPB says a servicer may agree to escrow the dues if you ask, and calls that uncommon. The servicer makes that decision, so a broker can’t promise it. A special assessment is a separate charge from the regular fee, and you pay that to the association too.
Where Is the Condo Fee on the Loan Estimate?
You’ve probably heard some version of “if it’s not in my mortgage payment, the lender doesn’t care about it.” The lender does care. Federal ability-to-repay rules make a lender count condo and HOA fees when it qualifies you, whether or not the fee is in the monthly payment and whether or not there’s an escrow account. Fannie Mae and FHA both put association dues in the housing expense behind your debt-to-income ratio. The same income supports a smaller loan on a unit with a bigger fee, and our article on how HOA fees affect how much you can borrow covers that math.
Three lines on your loan paperwork show how your loan handles the fee.
- Loan Estimate, page 1: The box labeled “Estimated Taxes, Insurance & Assessments” lists association dues on its “Other” line, with YES or NO under “In escrow?” Condo buyers usually see NO.
- Same page, one line up: “Estimated Total Monthly Payment” leaves out any fee marked NO.
- Closing Disclosure, page 4: When the loan has an escrow account, the fee appears under “Non-Escrowed Property Costs over Year 1.”
The biggest number on page 1 is called the total monthly payment, and for most condo buyers it isn’t the total. Add the fee marked NO to it before you compare a condo with a house.
Why Does the Lender Care About a Bill It Doesn’t Collect?
Mortgage documents make the condo fee the lender’s business. Most conventional mortgages on a condo carry a standard condominium rider, Fannie Mae and Freddie Mac Form 3140. In it you promise to pay all dues and assessments when they’re due. If you don’t, the lender may pay them, and whatever it pays becomes additional debt secured by your mortgage, with interest at your loan’s rate.
Massachusetts law explains why lenders want that clause. Under M.G.L. c.183A, section 6(c), a condo association’s lien steps ahead of the first mortgage for the regular fees that came due in the six months before the association files to enforce it, plus the costs and reasonable attorneys’ fees of that action. Special assessments, late charges, fines and interest stay behind the mortgage.
Unpaid fees can cost the bank money, which is one reason a lender checks how many units in a building are behind, as part of condo warrantability. A dispute with your own association is a question for a Massachusetts real estate attorney.
A pre-qualification is free and commits you to nothing, and it’s most useful when we run it with the real condo fee from the listing you’re looking at. Bring the listing. GoldCoast is a broker, so the lender decides what you qualify for, and your servicer decides what goes in escrow.