Take note of these HOA financing mistakes so you don’t make them.

A friend relocated from Michigan to Florida. Since he’d done his landscaping work for decades, he decided to continue this pursuit at his new home. He spent thousands of dollars and countless hours planting greenery. He was delighted with his work – initially. His investment of time and money ultimately proved fruitless. After a few months, he replaced all the plants and shrubs.

My friend failed to realize that the soil, moisture, and temperatures differed between the two locations. His knowledge of Northern horticulture gave him a false sense of confidence in his ability to tackle landscaping in the South. We have seen multiple HOAs make similar mistakes when it comes to finances. These errors are not so much about over-confidence as they are a matter of “you don’t know what you don’t know.”

Many clients have confessed that their board members mistakenly assumed they had the financial know-how to secure a loan for their community. They learned the hard way experience with home, auto, or commercial loans does not transfer into expertise with HOA loans. There could be significant and expensive missteps when a board has no experience with the HOA financing process.

Here are a few common oversights in the HOA loan process:

Can the board commit the time and resources necessary to manage all these things independently?

HOA loans require more lead time and leg work than a car or home loan. Early in the process, board members should evaluate buy-in from the community. The board should reach out to counsel to ensure the association has the legal authority to borrow funds. These steps will help avoid potential legal risks. 

The next steps in finding a suitable lender are: ensuring that terms are competitive and then navigating the application. Be forewarned the documentation and legal process can take considerable time. It is not uncommon for the entire process to take several months or even longer.

Obtaining an HOA loan without knowing what you are doing is a mistake.

Getting up to speed on an HOA loan can be a steep learning curve. 

These types of financial transactions are highly specialized and nuanced. Even though board members have likely entered into personal mortgages or even business-related loans, HOA borrowing is unique. A lack of traditional collateral and inimitable legal conditions add to their complexity. Plus, there are personal fiduciary responsibilities to consider.

It is unfortunate when board members make poor financial decisions with their investments. However, when a fiduciary makes an uninformed choice for the association, it impacts the entire community. They may even be held liable in certain circumstances.

Are board members willing to become experts in HOA loans? Are they comfortable with potentially falling short if challenged on their fiduciary responsibilities?

Not finding the right HOA Loan Lenders can be a mistake.

Financial institutions make loan decisions based on risk. To some lenders, HOAs can be risky borrowers, so they choose not to participate in the HOA loan market at all.

There is a relatively small pool of lenders who specialize in HOA loans. They are well equipped to assess the actual risk involved, and as a result, they offer much better interest rates and terms. Several clients have sought our services after receiving multiple loan rejections from their local bank or well-known financial institutions.

Success-based fee structure:

At Arch Capital Solutions, we believe our results speak for themselves. We only invoice our clients after successfully closing their loans. We never charge an hourly or retainer fee, and we are 100% there to help and support the association through the entire loan process.

Contact us today. Let’s discuss funding solutions for your association!


Arch Capital Solutions specializes in arranging loans for homeowners and condominium associations throughout the country.