How a homeowners association payment can change your borrowing power

A homeowners association payment can change your borrowing power. Here’s what you might want to think about when deciding to buy a home with a home owner’s association…

A homeowners association payment can make or break your ability and or your desire to purchase a home. One of the things about homeowners association payments that can shape your ability to secure financing is your debt to income ratio. Your debt to income ratio is the percentage of your income which goes towards monthly expenses. It is comprised of a total mortgage payment inclusive of principal interest taxes and insurance, as well as any other carrying costs you might have such as car loans credit card payments Etc. divided into your monthly gross income.

A homeowners’ association payment can be anywhere from $200 to as much as $400 a month or in some cases more. The homeowners’ association may take care of water, garbage, maintaining aesthetics of the complex Etc. One of the things people should take into consideration is how this payment affects their total monthly mortgage payment because that absolutely will affect their ability to qualify for a loan.

For example, in most situations with most credit scores and down payments $400 a month for example can be easily equivalent to about $80,000 of spending power. $80,000 of spending power can mean the difference between a single-family home and a property such as a condominium contain an HOA payment.

So as an example let’s say you can qualify for $400,000 for your mortgage payment, with your credit and income and the $400,000 condominium unit that you’re looking to purchase has a $400 per month homeowner association payment with it. It would be reasonable to assume you should be able to purchase a single-family home without a homeowners association payment for about $480,000 and have the payments be almost equal to each other.

This is because the homeowners association payment is only tied to the condominium and most single-family homes do not have an hoa payment hence your borrowing power for a single-family home in comparison to a condominium unit will always, always be greater. The benefits of buying a condominium unit are turn-key, require very little maintenance, and not much upkeep to really have to worry about. Whereas on a single-family home you have a roof, you have the lot the property is on and there are other factors that come into play on a single-family house in comparison to a condominium unit.

Would you be better off looking for a single-family home without the homeowners association payment? What price point you should be looking for? These questions can be best answered by a local lender that understands mortgages, has an acute understanding of payment income ratio, as well as a quality real estate agent local indigenous to the area specifically in which you’re looking in. The symbiotic relationship between the borrower, lender, and estate agent ought to be harmonious flow. Together these professionals can help you identify what options are available to you in support of your home buying efforts.

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