Congratulations on beginning your search for a home! This is an exciting time and one filled with lots of important decisions, such as whether or not you want to live in a homeowner’s association (HOA). HOAs pool homeowner resources for the general upkeep the community, so they’re great for those who want to take communal ownership over their neighborhood. There are trade-offs though. HOAs often have by-laws and other rules referred to as ‘restrictive covenants’ that govern how you can use the property you own.
Some homeowners aren’t keen on the idea of being subject to restrictive covenants while others want the conveniences and amenities that comes with living in an HOA like quiet hours and a community pool.
Before deciding, it’s important to know what restrictive covenants do.
Restrictive covenants govern the use and improvements of properties
When you enter into a restrictive covenant, you are agreeing to rules regulating the use and improvement of your property. Many of these rules are designed to help maintain property values and give the community a sense of uniformity. These can include:
- Exterior home design like paint colors
- Pet restrictions on breed and size
- Landscaping requirements
Before making an offer on a home, it’s a good idea to check whether or not the property is under restrictive covenants. You should also make sure to ask what the dues are in advance so you can get a better idea of what your monthly payment will be. That way you aren’t taken by surprise.
Restrictive covenants can apply to non-HOA homes
Even if you decide not to live in an HOA, you should be aware that even non-HOA homes can have restrictive covenants, or deed restrictions. For example, a non-HOA neighborhood may have covenants that are deeded into the property and clearly stated in its Covenants, Conditions and Restrictions (CC&Rs). If so, homeowners may be able to enforce these restrictions to their guests.
Non-compliance can result in penalties
Restrictive covenants are legal contracts that a homeowner enters into when they decide to purchase the home. If the homeowner decides to go against these restrictions, they can be held accountable for non-compliance.
Work closely with your real estate agent
If you prefer to avoid properties with restrictive covenants like those in an HOA, let your real estate agent know as soon as you start your search. That way they will immediately know what you’re looking for and avoid spending time showing homes in unwanted neighborhoods. Your agent will help you find the home you’re looking for and help you understand any restrictions on a property.
Guild Mortgage offers home financing only.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.