What financial ratios are the most important to a homeowners association?

Regarding an individual homeowner’s financial ratios in order to qualify for a mortgage or to refinance, the same criteria apply as for loans for any single family residence. Lenders generally like to see monthly PITI (principal, interest, property taxes, and insurance) payments no higher than 25% to 29% of a loan applicant’s monthly gross income. This is called a front-end ratio. In addition, lenders generally require monthly payments for PITI and all consumer debts (e.g., loans and credit cards) to be below 33% to 41% of gross monthly income. This is called a back-end ratio.

If you are asking about financial ratios for a homeowners association (HOA) itself, ratios are not the most important factor to check; HOA reserve accounts are. These are accounts set aside for expenses such as roofing, siding, painting, snow removal, lawn care, and other maintenance costs. A key question to ask is “Is there enough money (from HOA dues) to build up reserves to take care of expenses for X number of years into the future?”

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