A condo deal fell apart when the building's finances came into focus. The buyer had locked a 6.7% mortgage rate, but once the homeowners association's 1% reserve level was disclosed, the only financing option left came in at nearly 10% — and the buyer backed out.
Here's what to know
In a Reddit post, the buyer said the issue surfaced only after they had already paid for an appraisal, inspections, and other purchase-related costs. They said they were approved at 6.7% with a credit score "of 720 if not higher," but their lender later determined the HOA had just 1% in reserves, which made the loan ineligible for Fannie Mae or Freddie Mac financing.
The lender then proposed a different funding source. But when the revised disclosures arrived, the rate was, as the buyer put it, a "nearly 10% mortgage rate - WTF." The buyer chose to walk away and asked whether that had been the right move.
Most replies said it was. One commenter warned, "Right to walk away, 1% reserve might mean some emergency repairs or compliance will cost everyone thousands or more out of the blue." Another wrote, "Condo eligibility is partly about the project, not just your credit and income: the lender has to review the HOA budget, reserves, insurance, litigation and other project details, and a project-level issue can make the loan ineligible even after a rate is locked."
More background
The Reddit thread drew hundreds of comments, and many people argued that losing the upfront costs was still better than inheriting a bigger financial problem. One commenter who said they had served on a condo board described monthly fees rising from $150 in 2009 to $320 by 2023 while the association also took on major expenses, including a parking lot costing roughly $200,000, siding work of about $400,000, and a fence project close to $100,000.
Several commenters focused on what thin reserves can mean in practice, especially for older high-rises where large maintenance bills are inevitable. As one person put it, a 1% reserve "ain't gonna do much," and that can leave a buyer facing a hefty special assessment soon after closing.
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What can be done?
The thread also offered a clear takeaway for future buyers. One commenter said, "The practical lesson is to get the condo questionnaire and HOA financials to the lender early; a lock does not guarantee the property qualifies." When an HOA is involved, underwriting depends on the project's condition and the buyer's finances.
Another commenter said that, on the commercial side, they request those documents before even submitting an offer and called it a "Huge red flag" if a seller will not provide them. They added that residential buyers often learn this the hard way because they do not know to ask for the paperwork before paying for reports.
Commenters also pointed to a few other ways buyers can protect themselves: Lenders can check Fannie Mae and Freddie Mac condo lookup tools earlier in the process, and buyers may want to speak with a real estate attorney if state disclosure rules were not followed. For anyone still considering an HOA property, it may also help to understand the rule-changing process before closing.
One commenter summed up the OP's decision plainly, writing, "Walking away was reasonable."
Where can I learn more?
For buyers worried about what an HOA can mean for costs and day-to-day ownership, these stories show how association decisions and policies can reshape the experience.
• After years of steep dues, a homeowner said vague HOA requirements only worsened the burden.
• In Minnesota, lawmakers proposed blocking HOAs from stopping residents from adding rooftop solar.
• An EV owner said the board kept ignoring their requests over charger access.
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