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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

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  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. What Is an HOA?

MORTGAGE

What Is an HOA?

What you'll learn: Understanding the pros and cons of HOAs

EXPECTED READ TIME: 4 MINUTES

February 22, 2021

HOA stands for Homeowners Association. Many communities and condos have HOAs, and there are fees involved that you need to be aware of when you are deciding where to live. You should also understand what benefits an HOA offers.

An HOA is a self-governing organization meant to provide standards and guidelines for the community. They may also be in charge of building and amenity maintenance. For example, if your neighborhood is gated, or has a pool or playground, keeping these features in good working condition might be the HOA’s responsibility. In general, HOA rules and guidelines create community standards that everyone needs to follow to help maintain the beauty and upkeep of your community.

If your property has an HOA, you’ll need to follow certain rules and bylaws. Members of the community will elect officials from among the residents to help manage and maintain the values of your neighborhood.

What might be covered in HOA rules?

Depending on your community, it’s not uncommon for HOA rules and regulations to be many pages long. Before you actually commit to your new home, you need to be comfortable with the rules of your neighborhood. Here’s a short list of things that might be covered under your HOA guidelines. Of course, every community is unique so be sure to read and understand your HOA rules before you purchase your home. Also be sure to include any HOA dues in your budget as a monthly cost and be aware that they can increase over time.

Here are some examples of things that may be included in your HOA rules:

  • Acceptable house colors
  • Landscaping requirements
  • Requirements for additions to property — including decks, sheds, or other structures
  • Requirements for fencing
  • Requirements for lighting
  • Limits on public noise
  • Restrictions on basketball hoops in driveways
  • Restrictions on having RVs overnight in your driveway or on the street
  • Requirements for keeping your lawn and home regularly maintained and clean
  • Pool usage and rules

What do HOAs cost?

Every HOA is different based on the community or buildings. HOA costs can range from $250 to $10,000 per year. On the high end are condos that have access to pools, gyms, and other amenities. Those may have very high yearly/monthly HOA dues. Some HOAs for residential neighborhoods might only cost $50 to $80 per month and still offer great amenities.

As you’re calculating your homeownership costs and what you can afford, HOAs need to be part of that equation. The cost of an HOA can increase over time and — as we’ve seen — the costs can be high.

Some neighborhoods have both condos and single-family homes. If the condo has an elevator, or amenities like a pool or gym, the HOA fees for the condo could be significantly more than the HOA fees in the very same neighborhood for a single-family home. You’ll need to determine if the benefits are worth the increased fees, or you may be able to translate the savings in HOA dues to a single-family home.

What are the pros and cons of an HOA?

Some people love having an HOA in their neighborhood because it can mean having beautifully manicured landscaping and terrific amenities. Others don’t want the restrictions of an HOA and don’t need or want to pay for the amenities. You need to understand your needs and what’s important for you. Are you comfortable having a governing body tell you what you can and can’t do on your property?

Pros of an HOA

  • Property values may be higher in HOA communities due to the standardization and maintenance of homes and yards.
  • HOA boards can mediate neighbor disputes regarding property issues.
  • Your HOA may plan social activities, which can help you meet new people.
  • Some HOAs include amenities such as pools, clubhouses, security, or gyms.

Cons of an HOA

  • HOAs have fees that you need to calculate into your  monthly budget.
  • HOAs can place restrictions on what you can and cannot  do on your property.
  • Some HOAs can pester you for the slightest infraction, so you’ll need to understand your tolerance level.
  • There can be penalties if you break the HOA rules, and continued defiance can be costly.

Like everything else with homeownership, it’s important for you to understand the value that an HOA can bring and determine if the benefits ultimately suit your needs.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Beginner’s Checklist for Housing Needs

In home buying, it's important to understand everything that's involved. Follow PenFed Credit Union's step-by-step process before you step into your new home.

How to Prepare to Buy a House in One Year

Buying a house moves quickly, so one year's preparation is key. PenFed Credit Union answers how to prepare to buy a house, no matter how close or far you are financially.

Buying a Home Checklist — Part 1

PenFed Credit Union continues to help our members by providing a checklist for buying a home, including the costs and needs associated with homeownership.

Buying a Home Checklist — Part 2

PenFed Credit Union continues educating members with the first steps to buying a home, including how to make an offer on a home and finding the best real estate agent.
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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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