What Are HOA Fees and How Do They Affect What You Can Borrow?
Most condo buyers focus entirely on the mortgage payment. But lenders count HOA fees against your borrowing power dollar-for-dollar, and that shift in what you qualify for can be bigger than you’d expect.
The short answer: HOA fees (also called condo fees) are monthly charges paid to a homeowners association to cover shared costs in a condo, townhouse, or planned community. For mortgage purposes, lenders count every dollar of your monthly HOA fee as a housing expense, reducing how much mortgage you can carry. A $400/month condo fee can lower your effective purchase ceiling by $60,000 or more.
What HOA Fees Actually Cover
When you buy a condo or a home in a planned community, you’re buying into a shared structure. The HOA, the organization that governs the building or development, collects monthly dues from every owner to keep the whole thing running. GoldCoast has a guide for joining and participating in an HOA.
Depending on the property, your monthly fee might cover building insurance, exterior maintenance, landscaping, trash removal, snow plowing, water and sewer, amenities like a gym or pool, and a reserve fund for future big-ticket repairs like a new roof or elevator.
On the North Shore, HOA fees for condos in newer buildings in Danvers, Peabody, and Beverly typically run between $250 and $600 per month, depending on building age, amenities, and how well-funded the reserves are. Older converted buildings or larger complexes with elevators and pools can run $700 or more.
In a single-family home, there’s no HOA unless you’re in a planned neighborhood with shared amenities. But for any condo purchase, including townhouses, expect an HOA fee to be part of the equation.
How Lenders Count HOA Fees Against You
Here’s what catches a lot of first-time buyers off guard: your lender doesn’t just look at your proposed mortgage payment when deciding how much to lend you. They look at your total housing cost, which includes your mortgage principal and interest, property taxes, homeowners insurance, and your full HOA fee.
That combined number gets measured against your gross monthly income. Lenders call this your debt-to-income ratio, or DTI. Most conventional loans cap total housing costs at 28–45% of your gross monthly income, depending on the program and your credit profile.
North Shore Example
Say you’re looking at a condo in Beverly priced at $425,000. You’re putting 5% down, so your loan is $403,750. At a 6.75% rate on a 30-year term, your principal and interest payment is roughly $2,620/month. Add $450 in estimated property taxes, $120 in homeowners insurance, and a $400/month HOA fee, and your total monthly housing cost is $3,590.
Now say you earn $8,500/month gross. Your housing DTI is 42%, workable on many programs but leaving little room. If that same condo’s HOA fee were $600 instead of $400, your DTI jumps to 44.8%, and some lenders would decline or require a higher down payment.
The Real Impact on Your Purchase Price
To make this concrete: if a lender qualifies you for $2,800/month in total housing costs, that $2,800 has to cover your mortgage payment, taxes, insurance, and your HOA fee. Every dollar going to HOA is a dollar not going toward your mortgage, which means a dollar less of purchase price.
| Monthly HOA Fee | Remaining for Mortgage (P&I) | Approx. Purchase Ceiling* | Difference vs. No HOA |
|---|---|---|---|
| $0 (single-family) | $2,230 | ~$375,000 | Baseline |
| $250/mo | $1,980 | ~$333,000 | -$42,000 |
| $400/mo | $1,830 | ~$308,000 | -$67,000 |
| $600/mo | $1,630 | ~$275,000 | -$100,000 |
*Assumes $2,800/month total housing budget, $570/month for taxes and insurance, 6.75% rate, 30-year term, 5% down. For illustration only. Your numbers will differ.
“A $400 HOA fee is the equivalent of financing about $67,000 less house. Most buyers never think about it that way until they’re running the numbers with us.”
John Donlon · Principal, GoldCoast Mortgage
What to Ask About HOA Fees Before You Make an Offer
The monthly HOA fee is just the starting point. Before you fall in love with a condo, here are the questions worth asking, because some of these can affect whether your mortgage even gets approved.
What’s included in the fee, and what isn’t?
In some buildings, the HOA fee covers heat and water. In others, you’re paying those on top. Understand what’s inside and outside the fee before you calculate your actual monthly cost of ownership.
How funded are the reserves?
The reserve fund is money set aside for major future repairs. An underfunded reserve is a red flag both for your finances and your mortgage. Fannie Mae and Freddie Mac both require reserve funds to be at least 10% of the annual budget for a condo to qualify for conventional financing. If the reserve is underfunded, your loan options narrow significantly.
Has the fee increased recently, and by how much?
A fee that’s gone up 15–20% in the last two years is worth investigating. It could mean the building has deferred maintenance it’s now catching up on, or that insurance costs have spiked. Both are common on the North Shore after recent property insurance market changes.
Are there any pending special assessments?
A special assessment is a one-time charge levied on all owners for a major repair the reserves can’t cover: a new roof, repaved parking lot, or HVAC replacement. Some lenders will pause or deny financing if a large assessment is pending. Always ask the listing agent and request HOA meeting minutes going back two years.
FHA buyers: check the approval list first.
For FHA loans, the condo itself needs to be on the FHA-approved list. Many buildings on the North Shore aren’t, which rules out FHA financing entirely. This is something worth running down before you make an offer, not after.
HOA Fees and Condo Mortgages: How GoldCoast Helps
As an independent mortgage broker, GoldCoast doesn’t originate loans. We shop lenders on your behalf and match you with the one that handles your specific situation best. That matters a lot with condos, because different lenders have different rules about HOA fees, reserve fund requirements, and warrantability.
We also help you understand the real monthly cost of a condo before you make an offer, not just the sticker price. A condo at $380,000 with a $550/month HOA fee might cost you more every month than a house at $420,000 with no HOA. Knowing that before you’re in contract saves a lot of heartburn.
If you’re looking at condos on the North Shore, whether in Salem, Beverly, Danvers, or anywhere in Essex County, it’s worth a 20-minute conversation before you get too far into a search.
Ready to See What Your Numbers Actually Look Like?
GoldCoast Mortgage has been helping North Shore buyers navigate condos, HOA fees, and first-time homebuyer programs since 1998. A 20-minute conversation with John Donlon costs you nothing and usually answers most of the big questions.
GoldCoast Mortgage | 100 Cummings Center, Suite 544H, Beverly, MA 01915 | NMLS #4931
Frequently Asked Questions
Does the HOA fee count as debt when I’m applying for a mortgage?
Yes. Lenders include your full monthly HOA fee in your total housing expense calculation. It reduces how much mortgage you can carry dollar-for-dollar. For condos, this is one of the first things we calculate before running any pre-approval numbers.
Can I use a first-time homebuyer program if I’m buying a condo?
Yes, in most cases. MassHousing, the MHP ONE Mortgage, HomeReady, and Home Possible all allow condo purchases, but the condo itself needs to meet eligibility requirements. Warrantability is the main hurdle. We check this before you spend time on a property that won’t qualify.
What’s a special assessment and how worried should I be?
A special assessment is a one-time charge levied on all condo owners when the building needs a repair that exceeds the reserve fund. It could range from $2,000 to $20,000 or more. Always ask the listing agent and request HOA meeting minutes going back two years before making an offer.
Is it better to buy a condo or a house as a first-time buyer on the North Shore?
It depends on your income, savings, lifestyle, and the specific properties. A condo might have a lower purchase price but a high HOA fee that pushes total monthly cost above a comparable house. We can run both scenarios side by side. This post walks through the broader rent vs. buy question if you’re still in that stage.