When buying a condo or townhome, most buyers focus on the unit itself. The layout, price, location.
But behind every condo purchase is something just as important:
The financial health of the homeowners association (HOA) is important.
In 2026, lenders are taking a much closer look at HOA finances than ever before. That means the strength (or weakness) of an HOA can directly impact whether your mortgage is approved or denied.
Here’s what you need to know before making an offer on a condo or townhome.
Understanding HOA Reserves, Budgets, and Litigation
When lenders review a condo or townhome, they’re not just evaluating you, they’re evaluating the entire community.
Three key areas matter most:
1. HOA Reserves (Savings for the Future)
HOA reserves are funds set aside for major repairs and replacements, like:
- Roofs
- Elevators
- Parking lots/garages
- Structural components
- Common elements such a pools and clubhouse
A well-funded reserve account signals that the community is financially prepared.
A poorly funded reserve account raises concerns like:
- Future special assessments
- Deferred maintenance
- Increased financial risk for lenders
In many cases, lenders look for a decent percent of the HOA budget to be allocated toward reserves. Ask your Delmar Mortgage Loan Officer for more specifics on this topic.
2. HOA Budget and Financial Stability
Lenders review the HOA’s operating budget to understand:
- Income (monthly dues)
- Expenses (maintenance, insurance, utilities)
- Overall financial management
Red flags include:
- Consistent budget shortfalls
- Over-reliance on special assessments
- Poor financial planning
- Homeowners with delinquencies on HOA dues
A strong, balanced budget increases the likelihood that a condo project will qualify for financing.
3. Litigation (Legal Issues Within the Community)
Not all lawsuits are deal-breakers, but some can be.
Lenders will closely review:
- What the lawsuit involves
- Potential financial impact
- Whether it relates to structural or safety issues
Litigation involving:
- Structural defects
- Construction issues
- Financial disputes
can make it much harder, or even impossible, to secure traditional financing.
How Special Assessments Impact Your Mortgage Qualification
Special assessments are one of the most overlooked factors in condo buying. And one of the most important.
A special assessment is an additional fee charged to homeowners when:
- Reserves are insufficient
- Major repairs are needed
- Unexpected costs arise
Why This Matters for Condo or Townhome Buyers
If a special assessment is in place (or coming soon), it can impact your loan in two ways:
1. It Affects Your Debt-to-Income Ratio (DTI)
If you’re required to pay:
- A lump sum
or - Monthly installment payments
Lenders may include this in your monthly obligations, potentially reducing how much you qualify for.
2. It Signals Financial Instability
Frequent or large assessments can indicate:
- Poor HOA planning
- Underfunded reserves
- Deferred maintenance
This can raise red flags during the condo review process.
2026 Reality Check
With newer lending guidelines focusing more on building condition and financial health, unresolved or large assessments can delay or derail financing.
Tips for Evaluating HOA Strength Before Making an Offer
Here are some things to look out for:
1. Review the Reserve Funding
- Is there a reserve study?
- Are reserves adequately funded?
2. Ask About Upcoming Projects
- Any planned repairs or upgrades?
- Will they require a special assessment?
3. Look at Delinquency Rates
- Are many owners behind on their dues?
High delinquency can signal financial stress in the community.
4. Understand Monthly HOA Fees
- What do they include?
- Are they reasonable for the area and amenities?
5. Ask About Litigation
- Is the HOA involved in any lawsuit(s)?
- What is the potential impact of said lawsuit(s)?
6. Work With the Right Lender Early
This is one of the most important steps.
A knowledgeable lender can:
- Review the HOA upfront
- Flag potential issues early
- Help determine if the property will qualify
If you’re unsure how this process works, one of our mortgage professionals would be happy to go over details with you!
How This Connects to Condo Financing
HOA financial strength is a major factor in whether a condo is considered:
Eligible for conventional financing
Approved for FHA or VA loans
Considered “warrantable” or not
If you’re still deciding whether a condo or townhome is the right fit, explore this blog:
Are Condos and Townhomes a Smart Choice for First-Time Buyers in 2026?
FAQ: HOA Financials and Mortgage Approval
Yes. HOA dues are included in your monthly housing expense and impact your debt-to-income ratio.
Many lenders look for at least 10% of the annual budget allocated to reserves, though stronger funding is better.
Yes, especially if it involves structural, safety, or major financial issues.
An additional fee charged to homeowners to cover unexpected or large expenses not funded by reserves.
Yes. Even if you qualify as a borrower, the condo project itself must meet lending guidelines.
Final Thoughts
When buying a condo or townhome, the HOA isn’t just a line item—it’s a key part of the approval process.
Strong HOA financials can help your loan move forward smoothly. Weak financials can create delays, added costs, or even a denied loan.
The smartest buyers in 2026 aren’t just evaluating the home; they’re evaluating the entire community behind it.
Before you make an offer on a condo or townhome, make sure both you and the property are positioned for approval. Connect with a Delmar Mortgage loan officer to review your options, evaluate the HOA, and move forward with confidence.
