Background

Condo fees cover common-area upkeep, building insurance, utilities for shared systems, reserve contributions, and sometimes amenities. As condos grew in popularity after the 1960s, lenders built specific checks into underwriting to assess both the buyer’s ability to pay recurring fees and the financial health of the condo project (budget, reserves, special assessments, litigation).

Why lenders care (quick overview)

  • Monthly impact: Underwriters include HOA/condo fees when calculating a borrower’s DTI. A higher DTI can reduce loan size or lead to denial.
  • Project risk: Lenders and agencies (Fannie Mae, Freddie Mac, FHA) review the condominium association’s budget, percent of owner-occupied units, reserve funds, and any pending litigation or unpaid dues—issues here can make a project ineligible for certain loan programs (see Fannie Mae and HUD guidance).
  • Special assessments: Unexpected special assessments are treated as potential future debt and can be underwritten as a scheduled monthly obligation.

How condo fees affect DTI — a numeric example

  • Monthly gross income: $6,000
  • Existing debts (car, student loans): $1,000
  • Proposed mortgage payment (PITI): $1,800
  • HOA fee: $500

Total monthly debts = $3,300. DTI = 3,300 / 6,000 = 55%.
Many lenders prefer DTI under ~43%, though agency and lender overlays vary and compensating factors may allow higher ratios (see CFPB and agency guides).

Project eligibility and document checks

Lenders don’t just add fees to DTI — they also pull condo docs:

  • HOA budget and recent financial statements
  • Reserve study or reserve balance
  • Certificate of insurance for master policy coverage
  • Minutes or disclosures about pending litigation or assessments
  • Roster of owner-occupied vs investor-owned units

If the project fails an agency or lender test (for example, insufficient reserves or >15% delinquencies in dues), the lender may require a higher down payment, a different loan program, or decline financing altogether. (See Fannie Mae Selling Guide, Freddie Mac and HUD/FHA condo requirements.)

Common underwriting outcomes

  • Loan approved as-is: condo fees are manageable and the project is eligible.
  • Approved with conditions: lender requests additional reserves or evidence of special assessment repayment.
  • Loan denied for the property: project fails eligibility; buyer must choose another lender, a different loan product, or a different property.

Practical strategies to prepare

  • Get HOA documents early: request the budget, reserve study, and meeting minutes before making an offer.
  • Calculate DTI including fees: add condo dues, special assessments (when applicable), and any utilities covered by the HOA.
  • Ask lenders about project eligibility: some lenders maintain lists of approved condo projects; others will underwrite project-by-project.
  • Consider a larger down payment or a different loan program: FHA, Fannie, Freddie, and portfolio lenders have different condo rules. Portfolio lenders sometimes underwrite condos with more flexible criteria.

Real-world tip from practice

In my experience advising buyers, an unexpected $400–$600 monthly HOA fee often has a larger effect on purchase power than a modest change in mortgage rate. When a borrower increased their down payment by 5% to avoid a condo flagged by the investor, the loan moved from conditional denial to approval — a practical trade-off worth modeling early.

Common mistakes to avoid

  • Assuming the seller or listing will disclose all assessments. Always verify via HOA docs.
  • Forgetting to count HOA-covered utilities or special assessments in monthly cost calculations.
  • Assuming all lenders apply the same condo rules—programs and overlays differ.

Quick checklist before applying for a mortgage on a condo

  • Obtain HOA budget, audited financials, reserve study, and condo questionnaire.
  • Verify owner-occupancy rates and delinquency statistics.
  • Ask the lender whether the project is already approved or requires a project review.
  • Run DTI scenarios including the HOA fee and any likely assessments.

Useful links

Authoritative sources & further reading

Disclaimer

This article is educational and does not replace personalized advice from a licensed mortgage professional. Rules and agency guidelines can change; confirm program-specific condo requirements with your lender before you sign a purchase agreement.