My goal with this post is to help clear up the most common misconceptions I run into and put reverse mortgages in context with other mortgage options available for people who are 62 and older. As always, I like to provide as much information as possible to help you make informed decisions about your finances.

Jump to a question:

• Does the bank own my home with a reverse mortgage?
• Can I be forced out of my home?
• What happens if I move out permanently — does the bank take the home?
• Will my heirs inherit debt?
• Is it only for people in financial trouble?
• Do I have to take it as a lump sum?
• Is it more expensive than other options?
• Do I need good credit to qualify?
• How are seniors actually using reverse mortgages today?
• What other retirement mortgage options are there?
• FAQ: amounts, taxes, rates, heirs, and selling
• What’s the real first step?

Does the Bank Own My Home with a Reverse Mortgage?

No. You keep the title to your home for as long as you live there, just as you would a traditional mortgage. The lender places a lien against the property to secure the loan, but the ownership never transfers-you remain the legal owner.

This is the misconception I hear most often, and it’s simply not accurate. You’re still responsible for property taxes, homeowners’ insurance, and basic upkeep, but nothing about ownership changes.

Can I Be Forced Out of My Home with a Reverse Mortgage?

No, not as long as you meet the loan’s basic requirements. With a Home Equity Conversion Mortgage (HECM – pronounced “heck-m”), the FHA-insured version most people get, you can live in your home for as long as it remains your primary residence and you keep up with taxes, insurance and maintenance.

There are no monthly mortgage payments due, and no set term that forces a move. The loan only becomes due if you sell, permanently relocate, or fall behind on those ongoing obligations.

What Happens If I Move Out Permanently — Does the Bank Take the Home Then?

No, not immediately and not automatically. Moving out permanently to assisted living, a nursing home or in with family does make the loan “due and payable”, but the lender has to follow a formal process. You (or your heirs) have options before anything can happen to the home.

There is an important distinction between a temporary and a permanent move. If you are away for medical care, the loan isn’t triggered as long as you’re back within 12 consecutive months; a co-borrowing spouse can also stay in the home the whole time regardless. It’s only once the absence becomes permanent or stretches past twelve months with no co-borrower in place, that the loan matures.

Once it does, the lender must send a formal notice, and you or your heirs typically have six months to sell the home or pay off the loan, with the ability to request an extension if you’re actively working toward a sale or refinance. During that window, the options are the same non-recourse protections that apply to heirs generally: sell the home and keep any remaining equity, pay off the balance to keep the property in the family, or walk away owing nothing beyond the home’s value. The bank doesn’t simply take the house away the day someone moves out. A foreclosure may happen only if that window passes with no actions taken.

Will My Heirs Inherit Debt From My Reverse Mortgage?

No. HECMs are non-recourse loans, which means that neither you nor your heirs will ever owe more than the home is worth when the loan comes due, even if the balance has grown larger than the home’s value (or if the home has depreciated in value). FHA mortgage insurance covers that gap.

When the loan does come due, heirs typically have options: sell the home and keep any remaining equity, refinance it into their own name, or walk away without owing anything out of pocket.

Is a Reverse Mortgage Only for People in Financial Trouble?

No. While reverse mortgages started out with that reputation, today they’re used just as often as a proactive planning tool, creating a line of credit that grows over time as a backstop, supplementing retirement income without selling investments in a down market, or funding a home purchase without a monthly payment.

It’s not an emergency-only product; for the right household, it’s a retirement income strategy.

Do I Have to Take a Reverse Mortgage as a Lump Sum?

You have options with how you receive the funds – a lump sum, monthly payments, a growing line of credit or even a combination based on what fits your financial needs and goals.

The line of credit option is worth knowing about specifically as the unused funds in it grow over time, which can make it a useful reserve to have in place before you actually need it.

Is a Reverse Mortgage More Expensive Than Other Options?

Not necessarily – it depends on your timeline and how you plan to use the funds. There are real costs, including an upfront FHA mortgage insurance premium and ongoing annual premium, similar to a standard FHA mortgage. All mortgages have closing costs associated with them whether they’re financed or paid out of pocket.

It’s important to consider all possible mortgages for your personal scenario to make an informed decision.

Do I Need Good Credit to Qualify for a Reverse Mortgage?

There is no minimum credit score for a HECM reverse mortgage. Instead, lenders run a financial assessment that looks at your payment history over the past 24 months and your residual income to confirm that you can keep up with the property taxes, insurance and upkeep of the home.

A less-than-perfect credit history doesn’t automatically disqualify you. What matters most is whether your recent payment history shows you can reliably cover those ongoing housing costs. This is one of the biggest differences from qualifying for a traditional mortgage or HELOC, and why a reverse mortgage is often more accessible than seniors think.

How Are Seniors Actually Using Reverse Mortgages Today?

More seniors are turning to reverse mortgages simply because of where their money is sitting. Nationally, retirees’ median income runs well above their median retirement savings and for many households, the home is the largest asset they have by a wide margin. If most of your net worth is tied up in your house, a reverse mortgage is one of th few tools that lets you access it without selling or taking on a new monthly payment.

Two recent examples from my own clients show how differently this can play out:

One client wanted to lower her monthly housing costs. A reverse mortgage eliminated her mortgage payment, so her only ongoing housing expense became property taxes and homeowners insurance. This was a meaningful drop in what she needed to cover each month on a fixed income. She was also able to use the reverse mortgage to make some improvements to her Seattle home.

Another client in Bellingham was carrying high-interest debt that had built up over time on a limited income, along with a monthly mortgage payment he wanted gone. A reverse mortgage paid off the debts and eliminated the mortgage payment in the same transaction. This removed the financial burden of the debts and freed up his monthly cash-flow.

Both were homeowners with real equity and a mortgage or debt payment that no longer made sense to carry on a fixed income. The math often works better than people assume, but it often helps to look at the full picture first and review possible options.

What Other Retirement Mortgage Options Are There Besides a Reverse Mortgage?

Here’s the part I think gets lost in the misconception conversation: a reverse mortgage is one tool among several for homeowners 62 and up, and it isn’t automatically the right one. Before recommending any product, I believe in reviewing your financial picture first–your income, other assets, how long you plan to stay in the home, etc. This helps to determine what your options are and allows you to make an informed decision.

Other paths include a traditional HELOC, the First Lien HELOC Sweep, a renovation mortgage or possibly even down-sizing. I’ve laid out a full comparison on my retirement mortgage options page.

Frequently Asked Questions

How much money can I actually get with a reverse mortgage? 
It depends on four things: your age, your home’s value (up to the 2026 HECM limit of $1,249,125), current interest rates, and any existing balance that needs to be paid off first. Generally, the older you are and the more home equity you have, the more funds you can access.

Do I have to pay income taxes on the money that I receive?
No. Because reverse mortgage funds are loan proceeds rather than income, they’re generally not taxable, whether you take them as a lump sum, monthly payments, or a line of credit draw, and they typically do not affect Social Security or Medicare eligibility.

That said, I’m not a tax advisor or Medicare specialist, so it’s worth confirming with your financial advisors.

What happens if I live longer than expected and the loan balance grows past my home’s value?
Nothing changes for you. HECMs are non-recourse loans backed by FHA mortgage insurance, so you can never owe more than the home is worth when the loan becomes due, no matter how long you live there or how large the balance grows.

You can continue living in the home for as long as it remains your primary residence and you meet the loan’s ongoing requirements.

Is the interest rate fixed or variable?
Both options exist and which one you choose affects how you can access your funds. A fixed rate typically requires taking the full loan amount as a lump sum at closing, while an adjustable rate comes with more flexible payout options, including the growing line of credit.

Which one fits best depends on whether you want funds available over time or need a set amount upfront.

Can I still leave my home to my children?
Yes. Your heirs aren’t required to keep the home or repay the loan out of pocket. They can sell it and keep any remaining equity, refinance it into their own name to keep it in the family, or turn it over to the lender if that’s what they want to do.

Non-recourse protection means they’re never going to be on the hook for more than the home’s value, no matter what the loan balance has grown to.

What if I want to sell or move a few years after closing?
You are free to sell or move at any time–there is no required minimum stay. The loan is paid off out of the sale proceeds and any remaining equity is yours to keep, with no prepayment penalty whether you’re paying off the reverse mortgage through a sale, refinance or some other way.

The Real First Step

Whether a reverse mortgage, a HELOC or something else entirely ends up being the right fit, the starting point is the same: a conversation and review about your finances and goals. If you are weighing your options, I’m happy to walk through the numbers with you and help lay out what each path may look like for your situation. Let’s talk!

Escalation clauses come up in almost every competitive Seattle-area offer conversation, but most buyers have never seen how one is actually structured. Here’s how they work, what they protect you from, and where they can work against you.

If you’ve written — or lost — a competitive offer anywhere in King, Pierce, or Snohomish County, there’s a good chance an escalation clause was part of the conversation. It’s one of the most common tools buyers use to compete on price without having to guess the exact winning number upfront. It’s also one of the most misunderstood.

What is an escalation clause?

An escalation clause is a provision in your purchase offer that automatically increases your offer price by a set increment above any competing offer, up to a maximum you set. Instead of guessing what it will take to win, you’re telling the seller: I’ll beat the next-best offer by this much, up to this ceiling.

A typical clause looks something like this: “Buyer offers $800,000, and agrees to escalate the purchase price by $5,000 increments above any other bona fide competing offer, up to a maximum purchase price of $850,000.”

The three components that matter:

• The base offer. Your starting price — often at or near list price, sometimes above it in a hot market.
• The increment. How much your offer increases above the next-highest competing offer each time it’s triggered.
• The cap. The absolute maximum you’re willing to pay, regardless of how high other offers go.

Read: Understanding the Numbers Behind a Bidding War Offer for how bidding above list actually affects your monthly payment and cash to close — it’s usually a smaller impact than buyers expect.

What an escalation clause protects you from

Without an escalation clause, you submit one number and hope it’s enough. If you guess too low, you lose the home. If you guess too high, you may have overpaid compared to what it actually would have taken to win.

An escalation clause solves this by only raising your price as high as it needs to go to beat the competition — and no higher than your cap. In theory, you never overpay beyond what was necessary to win, and you never lose a home you were actually willing to pay for.

Where escalation clauses can work against you

The theory holds up cleanly on paper. In practice, there are a few real risks worth understanding before you use one.

• Your ceiling becomes visible. Once a listing agent sees your escalation clause, they know your absolute maximum. Some agents will use that information — sharing it with other buyers, or coming back to ask you to release your cap as a “best and final” number — even if no competing offer actually reached it. This is one of the most common criticisms of escalation clauses, and it’s the main reason some agents prefer a strong, single best-and-final number instead.
• Proof of the competing offer isn’t always required — or verifiable. A well-drafted clause requires the seller to provide a copy of the competing offer (with identifying details redacted) before your price escalates. Without that requirement, you’re trusting the seller’s representation that a higher offer exists. Washington’s standard NWMLS escalation addendum includes this documentation requirement — make sure your agent is using it, not an informal version.
• It can escalate past what the home will appraise for. An escalation clause raises your contract price, not the appraised value. If your price escalates to your cap and the appraisal comes in below that number, you’re back to the same appraisal-gap decision every over-list offer faces — except now you may be further above value than you intended to go.
• It signals urgency. An escalation clause tells the seller you want this specific home enough to build in an automatic bidding mechanism. In a less competitive situation, that can work against your negotiating position on other terms.

Read: Appraisal Guide for Washington Homebuyers for what happens when the appraised value comes in below your contract price, and what your options are.

Should you cap it at the top of your budget, or below it?

This is the question I get most often, and the answer is almost always: know your true ceiling before you write the offer, and don’t set the cap higher than a number you’d actually be comfortable closing at.

It’s tempting to set the cap at the absolute top of what you could theoretically qualify for. I’d encourage against it. An escalation clause is legally binding up to its cap — if your price escalates all the way to your maximum and the seller accepts, you’re contractually committed at that number, appraisal gap and all. Decide your real number — the one that accounts for a possible appraisal shortfall — before you’re in the middle of a multiple-offer situation and adrenaline is running the decision.

Read: Seattle Bidding Wars: How to Help Your Offer Win for the broader strategy behind competing on a home, including how a strong preapproval and closing timeline factor in alongside price.

Pairing an escalation clause with appraisal gap coverage

Because an escalation clause can push your contract price above what a home appraises for, many buyers pair it with a stated appraisal gap coverage amount — agreeing upfront to cover a specific dollar amount (or a set number of dollars per $1,000 of purchase price) between the appraised value and the contract price, rather than waiving the appraisal contingency entirely. This gives the seller confidence the deal will close even if the appraisal lags, without you taking on unlimited exposure the way a full waiver would.

Before you commit to a gap coverage number, run the numbers with your lender — not just your agent. Whether that gap gets paid in cash, whether it changes your loan-to-value enough to affect mortgage insurance, and whether you have the reserves to cover it are all things worth confirming before the number goes into your offer, not after it’s accepted.

Frequently asked questions

Does an escalation clause guarantee I’ll win the home?

No. It only raises your price up to your stated cap. If a competing offer exceeds your maximum, or if the seller prefers another offer’s terms — closing timeline, contingencies, earnest money — you can still lose the home even with an escalation clause in place.

Can a listing agent see my maximum price?

Yes. Your cap is stated in the offer itself, so the listing agent — and by extension the seller — knows your absolute ceiling. This is one of the main tradeoffs of using an escalation clause instead of a single best-and-final number.

Do I need proof of a competing offer for my price to escalate?

You should require it. A properly drafted escalation clause — including Washington’s standard NWMLS escalation addendum — requires the seller to provide documentation of the competing offer before your price increases. Without that requirement, you’re relying on the seller’s word alone.

What happens if my escalated price is higher than the appraisal?

The same rules apply as any over-list offer: your lender bases your loan on the lower of the appraised value or the contract price. You’ll need to cover the gap in cash, renegotiate, or rely on an appraisal contingency if you kept one in place.

If you’re preparing to compete on a home anywhere in Washington State, I’m happy to run the numbers with you before you set your escalation cap — including what an appraisal gap would actually cost you at different price points. Reach out — let’s talk it through.

Welcome to this week’s Mortgage Porter Weekly update! In this video, I cover last week’s labor market data, where mortgage rates stand according to the Optimal Blue index, the economic reports to watch this week, and a look at where mortgage-backed securities are trading this morning. Plus, this week’s spotlight is for anyone who’s been turned down for a mortgage – don’t give up!

Recap From Last Week

Last week, labor market data was the main focus, led by Friday’s jobs report. Employers shed 23,000 jobs in July, compared with expectations for an increase of about 80,000. On top of that, job gains for May and June were revised lower by a combined 103,000, suggesting the labor market has been weaker than previously reported.

Other reports reinforced that trend. ADP estimated private employers added just 44,000 jobs in July, well below expectations, with hiring concentrated in education and health services. Revelio Labs also estimated weaker hiring, with healthcare accounting for more than one-third of new jobs. Job openings slipped to 7.36 million in June, and the employment component of the ISM Services Index fell into contraction territory. Job site ZipRecruiter also described the labor market as subdued in its latest earnings report.

One encouraging sign: initial unemployment claims remain relatively low, suggesting layoffs are still limited. However, continuing claims remain elevated, meaning many people who lose their jobs are taking longer to find new work. Overall, last week’s reports point to a job market that continues to cool – an important trend as the Federal Reserve considers its next interest rate decision.

Optimal Blue Rate Index

Optimal Blue reports the average 30-year fixed rate, as of last Friday, August 7th, at 6.640% – slightly improved compared to what I shared with you last week. It’s very close to where we were in rates this time last year. You can see on the graph that the low point for the 30-year fixed rate was just below 6%, prior to the conflict in Iran.

Please remember: this Optimal Blue index reflects approximately 35% of mortgage transactions – lenders who use OB. You cannot lock in last week’s rates today, and your credit score, loan-to-value, and other factors will impact what rate you may qualify for. This is simply intended to give you a sense of how rates are trending. Please contact me for current mortgage rates.

Economic Calendar

We’ll be watching the CPI and PPI reports this week, as they’re key indicators of inflation. The forecast is for CPI to show inflation rose 0.1% in July, bringing the year-over-year number down from 3.5% to 3.4%. The core reading is expected to rise 0.2%, with its year-over-year figure declining from 2.6% to 2.5%. Let’s hope the data comes in tame – mortgage rates, or more specifically the mortgage-backed securities they’re based on, tend to react negatively to signs of inflation, which can push rates higher.

• Monday: No economic reports
• Tuesday: ADP Weekly, Existing Home Sales
• Wednesday: Consumer Price Index (CPI)
• Thursday: Jobless Claims, Producer Price Index (PPI)
• Friday: Retail Sales, Consumer Sentiment

Next FOMC meeting: September 15–16, 2026. CME FedWatch odds currently show a 52% probability of a 25 basis point move.

Morning MBS Update

As of around 11:30 am Pacific Time, MBS are down 19 basis points, and the Dow is down 183 points – largely due to oil prices, higher yields on U.S. Treasuries, and continued uncertainty tied to the Strait of Hormuz.

In the Spotlight: Turned Down for a Mortgage? Don’t Give Up.

Have you been turned down for a mortgage? Get a second opinion. I’m happy to review your scenario for a home purchase or refinance here in Washington state. Some lenders may lack the experience or product options to help with your specific situation.

The worst case? We work together on a strategy and build a game plan so you can eventually buy or refinance. The best case? I have a solution for you right now. Between traditional mortgage programs, portfolio and specialty loans, and my ability to broker loans too – there’s usually a path forward. Don’t give up!

Let’s Talk About Your Scenario

If you have questions about your specific scenario – whether you’re buying, refinancing, exploring a retirement mortgage, or just figuring out your options –  I’m always happy to help.

This rounds out the income series I’ve been building — if you haven’t seen the others, they cover salary, hourly, and variable income, bonus, overtime, and commission income, RSU and restricted stock income, self-employed and 1099 income, and rental income. This post covers everything else — income you receive independent of currently working.

Retirement and Pension Income

Pension and retirement account income is one of the more straightforward income types to document, precisely because it’s presumed to continue — there’s no employer who could lay you off. Lenders typically want to see:

• An award letter from the pension provider, or your two most recent years of 1099-R forms
• Bank statements showing the income is actually being deposited
• Evidence the income has no defined expiration date — if your pension is structured as a term annuity with a set end date, the lender will check how much time remains

If you’re drawing income from a 401(k), IRA, or other retirement investment account rather than a traditional pension, that’s typically treated as distribution income rather than pension income — see the section below.

Social Security Income (retirement and disability)

Social Security retirement and disability benefits are documented with your Social Security Administration award letter (or SSA-1099) and bank statements showing deposit. A few things worth knowing:

• Because Social Security income is generally not subject to federal income tax, lenders can often “gross up” the amount for qualifying purposes — treating it as if it were a higher, pre-tax figure.
• If you’re receiving Social Security Disability Insurance (SSDI) with a scheduled continuing disability review, the lender may ask for documentation that benefits are expected to continue.
• Social Security retirement income, once started, is treated as having no defined expiration and generally doesn’t require a continuance letter beyond the award letter itself.

Long-term Disability Income

Long-term disability (LTD) income, whether from a private policy or an employer-sponsored plan, is documented with the disability policy or benefits statement, along with proof of receipt. The key detail lenders check is the expiration date: if your benefits are scheduled to end within a defined window — commonly referenced against a three-year horizon — and there’s no clear renewal path, the income may not be fully usable, or may need to be discounted.

Alimony and Child Support

Alimony (spousal support) and child support can generally be used as qualifying income, but lenders want to see a track record, not just a court order. Typical requirements:

• A copy of the divorce decree, separation agreement, or court order establishing the payment amount
• Evidence of consistent receipt — commonly the most recent six months of bank statements or deposit history
• Documentation that payments are likely to continue for at least three years from the date of the loan application

If you’ve only recently started receiving payments, or the paying party has an inconsistent payment history, this can affect how much of the income a lender is willing to count. It’s worth having this conversation early if alimony or child support is a meaningful part of your qualifying income.

Investment and Asset Distribution Income

If you’re drawing regular distributions from investment accounts — retirement or otherwise — to fund your lifestyle, that can sometimes be used as qualifying income even if you’re not yet at traditional retirement age. Lenders will typically want to see:

• A history of actual distributions being taken (not just account value)
• Evidence the account balance and distribution rate could reasonably support continued payments for at least three years
• For interest and dividend income specifically, typically a two-year average from tax returns, along with documentation of the underlying assets

This is a nuanced area, and it’s one where working with an experienced loan officer matters — the calculation isn’t always intuitive, and it varies by loan program. If your assets are substantial but your documentable income is thin, an asset-based mortgage may be a better fit than trying to qualify on distribution income alone — it lets your assets themselves support qualifying, rather than requiring a distribution history. Read: Asset-Based Mortgage Loans

Trust Income

Income from a trust can be used if it’s guaranteed, constant, and will continue for at least three years. Documentation typically includes the trust agreement showing terms of the distribution, along with evidence of receipt over the most recent 12 months.

The common thread

Across every income type in this post, lenders are asking the same three questions: is it documented, is it consistent, and is it likely to continue? The specific paperwork differs, but that underlying test doesn’t change. If you’re not sure whether a particular income source will qualify, or how much of it will count, that’s exactly the kind of question worth asking before you start house hunting rather than after you’ve found a home.

Frequently Asked Questions

Can Social Security income be increased for qualifying purposes since it isn’t taxed?

Often, yes. Because Social Security income is generally not subject to federal income tax, lenders can typically “gross up” the amount to reflect its higher pre-tax equivalent, which can meaningfully help your qualifying position.

How long does alimony or child support need to continue to be usable?

Lenders generally want evidence the payments will continue for at least three years from the date of your loan application, along with a consistent recent history of actually receiving them.

Can I use retirement account distributions as income if I haven’t retired yet?

Sometimes. If you have a documented history of taking regular distributions and your account balance could reasonably support continued withdrawals for at least three years, this income can often be used, even before traditional retirement age.

What if my long-term disability income is scheduled to expire?

If your benefits are set to end within a defined window and there’s no clear renewal path, a lender may not be able to fully count that income, or may discount it. It’s worth checking your policy’s terms and reviewing them with your loan officer early in the process.

Have income that doesn’t fit neatly into a category?

Retirement, Social Security, disability, alimony, trust, and investment income all have their own documentation paths — and combinations of these income types are common, especially for retirees and homeowners going through a life transition. If you’d like to walk through your specific income picture, I’m happy to help you sort out what will count and how.

If you’re retired or approaching retirement, it’s also worth seeing the loan programs built specifically for that stage of life — including reverse mortgages and HELOCs designed for seniors. 

Read: Retirement Mortgages Guide

See the complete guide: Types of Income That Qualify for a Mortgage in Washington State

Let’s talk · Get a rate quote

Rhonda Porter · Licensed Mortgage Advisor · NMLS #121324 · Washington State

Buying a condo or townhome in Washington means you’re not just qualifying for a mortgage — you’re buying into an association’s finances too. This guide walks through what to check before you write an offer, how HOA dues factor into your qualifying ratios (now and later, if you refinance), and how reserve funding, litigation, and special assessments can affect your financing.

If you’ve been house hunting in a condo or townhome community anywhere in Washington State, you may have noticed something: HOA dues have been climbing and so has talk of special assessments. This isn’t your imagination. Insurance costs for condo and HOA associations have risen sharply across the state, and Washington’s reserve study laws are in the middle of a multi‑year transition. Both of these directly affect whether a building qualifies for financing — and whether you may be hit with a large bill shortly after closing.

Here’s what I walk buyers — and condo owners considering a refinance — through when evaluating an association.

How Home Owner Association dues affect your qualifying debt‑to‑income ratio

Here’s something that surprises a lot of buyers: HOA dues aren’t part of your mortgage payment, but lenders still count them against you when qualifying. Your monthly dues get added into your debt‑to‑income (DTI) ratio right alongside principal, interest, taxes, and insurance — even though the association, not your lender, collects that money. A $500/month HOA due reduces your qualifying power in exactly the same way a $500 car payment would.

This matters for two reasons:

• Dues aren’t fixed. Like property taxes and insurance, HOA dues typically rise over time — and given the insurance and reserve‑funding pressures many Washington associations are facing right now, increases have been larger and more frequent than in past years. A building’s current dues are a starting point, not a guarantee.
• Timing can catch you off guard. If dues increase between your preapproval and closing — or if you’re comparing two similar units with meaningfully different dues — your qualifying numbers can shift even though the loan amount hasn’t changed. I always recommend confirming the current dues amount (and asking whether an increase is already planned or under board discussion) before finalizing how much home you’re comfortable offering on.

This doesn’t stop mattering once you own the home, either. If you refinance down the road, your current HOA dues get counted against your DTI at that point too — and if dues have risen since you purchased, that can potentially impact the qualifying power you’re counting on for a refinance (depending on what your income and other factors are in the future).

What is a special assessment, and why are they becoming more common?

Your regular HOA dues cover predictable costs — landscaping, management fees, utilities for shared spaces, and a contribution to the reserve fund. A special assessment happens when the reserve fund isn’t enough to cover a major expense, and the association bills owners directly to make up the shortfall.

Two forces are pushing more Washington associations toward special assessments — and higher regular dues — right now:

• Rising insurance premiums. Master policy costs for condo and HOA associations have increased significantly across the Puget Sound region, driven by construction cost inflation and how insurers are pricing climate and rebuilding risk. When premiums jump faster than a budget anticipated, boards sometimes have to assess owners — or raise dues ‑ to cover the gap.
• Underfunded reserves. Associations that have kept dues artificially low for years — rather than fully funding for roof replacement, siding, elevators, or plumbing — eventually face a bill they can’t defer any longer.

Neither of these is unique to any one building type. It can happen in high‑rise condos in downtown Seattle just as often as smaller townhome communities in Federal Way or Edmonds.

Washington’s reserve study requirements (and why they’re changing)

Washington law requires most condo associations (RCW 64.34.380) and HOAs with significant shared assets (RCW 64.38.065) to complete and maintain a reserve study — a professional estimate of major components (roof, siding, elevators, paving) and how much needs to be set aside each year to replace them on schedule. A full on‑site study is generally required at least every three years, with updates in between.

Here’s the part that catches buyers off guard: Washington is in the middle of transitioning older condo and HOA law into a newer, more uniform framework (the Washington Uniform Common Interest Ownership Act, RCW 64.90). The older reserve study sections are scheduled for repeal in 2028. That doesn’t mean the requirements go away — it means the rules an association is following today may be stricter, or structured differently, by the time you’ve owned the home a few years. It’s one more reason a current reserve study, not an old one, matters when you’re evaluating a building.

On the lending side, this is tightening too: Fannie Mae and Freddie Mac now require associations to allocate at least 15% of their annual budget to reserves as of January 4, 2027 (up from 10%), unless the association has a current reserve study supporting a different funding level. Associations that haven’t kept up with this will feel it — both in their budgets and in whether their building stays eligible for conventional financing, whether that’s a purchase or a refinance.

Read: Fannie Mae & Freddie Mac Changed the Rules on Condo Financing for the full timeline of every change — investor concentration limits, reserve requirements, insurance rules, and the Limited Review retirement — and what each one means for your purchase or refinance.

Read: Financing a Condo in Washington State for the full breakdown of how lenders evaluate a project, including reserve requirements, project review paths, and what makes a building non‑warrantable.

What percent funded should a reserve study show?

There’s no single dollar figure that’s “enough” — it depends entirely on the size of the building and what it has to replace. The number that actually matters is percent funded: the association’s current reserve balance divided by the fully funded balance the study calculates (what it should have, based on the age and condition of every major component).

• 70% or higher is generally considered healthy. The association can typically absorb upcoming replacements without a special assessment.
• 30–70% is a caution zone — worth a closer look at what’s coming due and whether the board is actively closing the gap.
• Below 30% signals high special assessment risk.

A high percent‑funded number alone doesn’t guarantee safety, though. Check the study’s component list for anything with a remaining useful life of zero, or due within the next year or two — a building at 75% funded can still be headed for a large assessment if a roof or elevator replacement is imminent. The trend matters too: an association at 45% funded and actively raising contributions toward the recommendation is often in better shape than one at 70% and drifting downward.

What to check before you write an offer

HUD recommends reviewing the association’s governing documents before you sign a purchase agreement, and I’d go further — these documents tell you as much about the financial health of your future home as the inspection does. Before you’re under contract, ask for:

• Current dues, and whether an increase is planned. Ask directly — boards often discuss upcoming increases in meeting minutes well before they take effect.
• The current reserve study. Not one from several years ago — the most recent one, its percent funded figure, and how that compares to the recommendation.
• The HOA budget. How much goes to reserves versus operating expenses, and whether dues have been raised recently (or held flat despite rising costs — often a warning sign, not a benefit).
• Meeting minutes from the last 12–18 months. This is where you’ll find early discussion of a pending assessment, litigation, or deferred maintenance long before it becomes official.
• The master insurance policy. What it covers, the per‑unit deductible, and whether roof coverage is on a replacement‑cost or actual‑cash‑value basis.
• Delinquency rate. What percentage of owners are behind on dues — a high rate strains the reserve fund and can affect financing eligibility.
• Any pending or active litigation involving the HOA. Construction defect claims, insurance disputes, and disputes with a management company or developer can stall or block financing entirely, and they’re not always disclosed upfront.
• Any pending or recent special assessments, even ones the seller may not have proactively disclosed.
• Does one person or entity own more than 20% of the condos in the development? This can cause the condominium to be classified as “non-warrantable” which could limit the types of mortgage programs available for financing.

In many transactions, this is what the resale certificate is for — but I’d encourage you not to wait for it. If your agent can request these documents early, you’ll have time to evaluate them (or walk away) before you’re financially committed with earnest money and inspection deadlines ticking. If you already own and are considering a refinance, the same documents are worth pulling again — associations change, and it’s been a while since most owners looked at them closely.

How this affects your mortgage — and your future refinance

A special assessment — or pending litigation — isn’t just a cost concern. It can directly affect whether your loan closes on schedule. Lenders evaluate the building alongside your personal qualifications, and several of the items above are exactly what shows up in that project review:

• A large, unresolved special assessment can make a building non‑warrantable, meaning it won’t qualify for conventional, FHA, or VA financing.
• Active or pending litigation — particularly construction defect claims — is one of the most common reasons a project is flagged as non‑warrantable. Even litigation that seems minor to the seller can be enough for a lender to decline the project.
• Reserve funding below required minimums is one of the most common reasons a condo project doesn’t pass review.
• If the master policy carries a per‑unit deductible, you’ll be required to carry an individual HO‑6 policy at closing — a cost worth budgeting for early, not discovering at the closing table.
• Higher HOA dues reduce your qualifying power directly, since they count against your DTI ratio — so a dues increase can shrink your budget even though your loan terms haven’t changed.

This project review isn’t a one‑time hurdle at purchase — it happens again every time you refinance. If dues, reserves, litigation, or insurance status have changed since you bought — and for many Washington associations right now, at least one of those has — a refinance can run into the same eligibility questions a purchase would, even though nothing about your own finances has changed. It’s worth a quick check on where your association stands before you assume a rate‑and‑term or cash‑out refinance will sail through.

The good news: non‑warrantable doesn’t mean unfinanceable, whether you’re buying or refinancing. Portfolio loans, jumbo non‑conforming programs, and certain non‑QM options can still work for a building that doesn’t meet standard guidelines — it just changes your loan options and pricing. I’ve covered this in detail, including a full comparison table of financing paths, in my condo financing guide. If a building you’re considering — or already own in — has any flags on this list, especially litigation, it’s worth a conversation with me before you’re under contract, or before you apply for a refinance.

Condo, townhome, or something in between?

One thing that trips buyers up: whether a property is legally a condo or a townhome isn’t always obvious from how it looks. A two‑story, single‑wall‑shared property can legally be structured as a condominium, which brings all of the HOA, reserve, and litigation considerations above along with it — even though it doesn’t look like a typical high‑rise unit. Understanding which structure you’re buying into changes what questions matter most.

Read: Townhome vs. Condo: Which Is Right for You in Washington State?

Frequently asked questions

Do HOA dues count toward my debt‑to‑income ratio?

Yes. Even though HOA dues aren’t part of your mortgage payment, lenders include them in your qualifying DTI ratio alongside principal, interest, taxes, and insurance. Higher dues reduce how much home you can qualify for — whether you’re buying or refinancing.

Can HOA dues increase after I buy?

Yes, and they often do. Boards typically raise dues to keep pace with rising insurance costs and reserve funding needs. Ask about any planned increases — and check recent meeting minutes — before you write an offer.

Can rising HOA dues affect a refinance?

Yes. Your current HOA dues count against your DTI ratio at the time of refinance, just as they did when you purchased. If dues have risen since you bought, that can reduce your qualifying power for a rate‑and‑term or cash‑out refinance — and the condo project itself goes through review again, so changes to reserves, litigation, or insurance status can also come into play.

How do I find out if a condo has a pending special assessment?

Request the HOA’s resale certificate, recent meeting minutes, and current budget before writing an offer. Pending assessments are often discussed in board minutes months before they’re formally announced.

Can a special assessment stop my loan from closing?

It can, if it’s large enough or unresolved and the project no longer meets the lender’s eligibility standards. This is why I recommend checking project status early rather than after you’re under contract.

What percent funded should a condo’s reserve study show?

70% or higher is generally considered healthy. Below 30% signals high special assessment risk. But always check the study’s component list for items due soon — a high overall percentage can still hide an imminent large expense.

Does pending litigation against an HOA affect my ability to get a mortgage?

Yes. Active or pending litigation — especially construction defect claims — is one of the most common reasons a condo project is considered non‑warrantable, which can rule out conventional, FHA, and VA financing. Portfolio or non‑QM options may still be available depending on the situation.

How often does Washington law require a reserve study?

Most associations with significant shared assets must complete a full on‑site study at least every three years, with updates in the years between, under RCW 64.34.380 and RCW 64.38.065.

Is a townhome safer from special assessments than a condo?

Not automatically — it depends on the legal structure and the HOA’s reserve funding, not on how the property looks. Some townhomes are legally condominiums and carry the same considerations.

Whether you’re considering a condo or townhome purchase, or thinking about refinancing one you already own anywhere in Washington, I’m happy to take a look at the HOA documents with you. Reach out — let’s talk it through.