The Number Tiffany Never Wrote A Check For (And Why It Almost Killed Her Approval)

Tiffany found a number in her loan file she never once wrote a check for, and it was the reason her approval almost fell apart.

She was buying a condo near Georgetown, SC. She had done her homework, she thought. She budgeted the mortgage payment, she budgeted the property taxes, she budgeted the homeowners insurance. What she hadn't budgeted were the HOA dues on the condo, or the subordinate lien already attached to the property. Her lender counted both of those automatically the moment her file hit underwriting, and her debt-to-income ratio jumped in a way she wasn't prepared for.

What Most Buyers Get Wrong About Housing Expense

Most buyers think "monthly housing expense" means the mortgage payment, maybe with taxes and insurance thrown in. That's an incomplete picture, and it's a situation that comes up often with condo buyers and buyers purchasing properties that carry existing financing.

Fannie Mae's Selling Guide, under B3-6-05, is specific about what gets included. Here is the guideline, word for word:

"The monthly housing expense includes the mortgage payment of principal and interest, hazard insurance, real estate taxes, mortgage insurance, homeowners association dues, and any subordinate financing."

Read that again. It's not just principal and interest. It's hazard insurance, real estate taxes, mortgage insurance when applicable, HOA dues, and any subordinate financing on the property, all added together into one monthly figure that drives your debt-to-income ratio.

Why This Trips Up Condo Buyers Specifically

Condos and townhomes almost always come with HOA dues. Properties that already have a second lien, like a home equity line or a seller-held note, carry subordinate financing. Both of those get folded into the housing expense calculation whether a buyer accounted for them or not. If a buyer shops for a property based on a mortgage payment estimate alone, and that property has high HOA dues or an existing subordinate lien, the real debt-to-income number can be meaningfully different from what they expected, sometimes enough to change what they qualify for.

What I Did For Tiffany

I ran Tiffany's numbers with the HOA dues and the subordinate financing included from the very beginning, before she made an offer, not after underwriting flagged it. That meant she knew her real housing expense and her real debt-to-income ratio before she fell in love with a specific unit.

The One Thing You Can Ask Today

If you're shopping a condo, a townhome, or any property with HOA dues or existing subordinate financing, ask your loan officer this exact question: "Can you run my debt-to-income ratio including the HOA dues and any subordinate financing on this specific property, so I know my real housing expense under B3-6-05 before I offer?"

That question is what kept Tiffany's approval together. It's a fair question for any loan officer to answer, and it's one you should get answered before you're under contract, not during underwriting.

Know Your Real Number First

I'm Jason Sharon, a licensed mortgage broker with Home Loans Inc. I find the path by running your true monthly housing expense against the actual guideline, before you make an offer on a property that might not fit. If you're considering a condo or a property with existing financing attached, call 843-LOW-RATE and let's run your real numbers first.

Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.

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