- Home
- Fee library
- HOA Fees at Closing: Transfer, Certification, Capital
HOA Fees at Closing: Transfer, Certification, Capital
If the home you are buying belongs to a homeowners association, the HOA can show up in three different places on your closing paperwork, and each place follows its own rule. This page sorts the three apart.
None of them count toward Section A, Origination Charges. Section A is the lender's own money, and it is the total LoanInspection grades against 3,787,575 loans in the public HMDA record. HOA money goes to the association or its management company, so it stays outside that total.
The three kinds of HOA money
1. The certification the lender orders. Before it funds a loan on a condo or an HOA home, the lender usually needs the association to confirm in writing that dues are current on the unit and to answer questions about the project, such as owner occupancy, litigation and reserves. The paperwork goes by many names (condo questionnaire, estoppel letter, resale certificate, status letter), and the HOA or its manager charges to fill it out. Because the lender requires it and only your association can produce it, the CFPB's commentary lists the "homeowner's association certification fee" as an example of a Section B charge, Services You Cannot Shop For. Section B lines are held to zero tolerance, so the amount on your Loan Estimate is the amount you should see at closing unless the lender properly issued a revised estimate.
2. The transfer fee. When ownership changes, the association moves the account from the seller to you and updates its records, and many associations or their management companies charge for that under names like transfer fee, processing fee or account setup fee. The lender does not require it; the purchase contract and the association's rules do. That puts it in Section H, Other, which the rule reserves for amounts you are likely to pay at closing that the lender knows about but did not impose. The CFPB's sample Closing Disclosure shows one as "HOA Processing Fee" at $150.
3. The capital contribution. Some associations collect a one-time payment from every new owner into the reserve fund, set in the governing documents as a fixed sum or a multiple of monthly dues, and called an initiation fee, working capital contribution or reserve contribution. It is not a deposit you get back when you sell. Like the transfer fee, it is a Section H item; the CFPB sample Closing Disclosure shows "HOA Capital Contribution" at $500.
And the one that is not a fee: prorated dues. If the seller already paid this month's dues, you reimburse the seller for the days you will own the home. That reimbursement is not in Sections A through H. It appears on page 3 of the Closing Disclosure under "Adjustments for Items Paid by Seller in Advance," on a line labeled HOA Dues with a date range; the CFPB sample shows $80.00 for 4/15/13 to 4/30/13.
Where each one lands
| HOA charge | Loan Estimate | Closing Disclosure | Tolerance |
|---|---|---|---|
| Certification, questionnaire, estoppel | Section B | Section B, Services Borrower Did Not Shop For, with the payee named | Zero |
| Transfer or processing fee | Section H | Section H, Other | No cap; good faith estimate |
| Capital contribution | Section H | Section H, Other | No cap; good faith estimate |
| Prorated dues | Not shown | Page 3, Adjustments for Items Paid by Seller in Advance | Not a lender estimate |
Slide the table sideways to see every column.
"No cap" does not mean anything goes. Third-party charges the lender does not require are judged by whether the estimate matched the best information the lender reasonably had when it issued the Loan Estimate.
On our sample Loan Estimate
The annotated sample is a $382,500 conventional purchase with no association, so there is no HOA line on it. If the sample home were in an association, a lender-required certification would join the appraisal, credit report and flood certification in Section B, and a transfer fee or capital contribution would sit under the optional owner's title policy ($1,350) in Section H. The full page is annotated in the sample Loan Estimate guide.
Who pays
The federal forms do not decide who pays an HOA charge. The purchase contract does, within whatever state law or the association's documents require. The Loan Estimate shows only the amounts the lender expects you to pay. The Closing Disclosure has Borrower-Paid, Seller-Paid and Paid by Others columns on page 2, so a transfer fee the contract assigns to the seller shows up in the seller's column on the same line.
Names on the two forms
| Loan Estimate | Closing Disclosure | Other names you may hear |
|---|---|---|
| HOA Certification Fee (Section B) | HOA Certification Fee, Section B, with "to" and the payee | condo questionnaire, lender questionnaire, estoppel fee, resale certificate, status letter |
| HOA Transfer Fee (Section H) | HOA Transfer Fee or HOA Processing Fee (Section H) | account setup fee, new owner fee, management transfer fee |
| HOA Capital Contribution (Section H) | HOA Capital Contribution (Section H) | initiation fee, working capital contribution, reserve contribution, buy-in |
| Not on the Loan Estimate | HOA Dues, page 3, with a date range | prorated dues, dues reimbursement |
Slide the table sideways to see every column.
Common questions
Who pays the HOA transfer fee, the buyer or the seller?
The purchase contract decides, and the forms only report what the contract set. Practice varies by state and by association.
Are HOA fees part of my closing costs?
The certification, transfer fee and capital contribution are, when you are the one paying them, which is why they sit in Sections B and H and roll into Total Closing Costs. Prorated dues are a settlement between you and the seller on page 3. Your ongoing monthly dues are not a closing cost; page 1 lists them under Estimated Taxes, Insurance & Assessments, and the CFPB sample Closing Disclosure marks them "In escrow? NO."
Why is the HOA fee on my Closing Disclosure but not on my Loan Estimate?
The Loan Estimate lists the Section H amounts the lender knew about when it issued the form, and HOA charges often surface later from the title company. Because these lines are held to a good faith standard rather than a percentage cap, a new line on the Closing Disclosure is allowed as long as the earlier estimate matched the best information the lender reasonably had.
You pay $29 at checkout.
Sources
- 12 CFR 1026.37(f)(2) and (g)(4), Loan Estimate content: https://www.consumerfinance.gov/rules-policy/regulations/1026/37/
- Official interpretations, comments 37(f)(2)-2 and 37(g)(4)-4: https://www.consumerfinance.gov/rules-policy/regulations/1026/interp-37/
- 12 CFR 1026.19(e)(3), good faith and tolerance: https://www.consumerfinance.gov/rules-policy/regulations/1026/19/
- 12 CFR 1026.38(f), (g) and (j), Closing Disclosure content: https://www.consumerfinance.gov/rules-policy/regulations/1026/38/
- CFPB sample Closing Disclosure, form H-25: https://files.consumerfinance.gov/f/201311_cfpb_kbyo_closing-disclosure.pdf