1Listing: Home Buying FAQs

Home Buying FAQs

Reprinted from California Homebuilder

Am I ready to buy a home?
Although renting gives the advantage of not having to worry about maintenance and other financial obligations associated with owning property, home ownership offers tax benefits as well as the freedom to make decisions about your home.
Unlike renters, homeowners who secure a fixed-rate loan can lock in their monthly housing costs. Even if, in some markets, your mortgage payments would be greater than rent for a comparable property, the tax breaks available to homeowners can make the cost of owning a home lower than the cost of renting.
Once a prospective homebuyer decides to buy, but before they can determine how much house they can afford, four key questions must be asked and answered.

Can I show proof of consistent employment?
Lenders look for steady service over a period of time, typically, over two years. Changing jobs, or losing one, is less important today or could even be viewed favorably, especially if the end result is equal or better income than the prior positions held in the past.
To avoid being disqualified, gaps in employment need to be explained, for example, "I just finished a tour of duty." "I worked part-time as a teacher and school was out for the summer." "My former employer laid off two-thirds of the staff and it took time to find a better position." All of those statements would explain gaps and would satisfy most lenders. Bottom line; demonstrate consistent income and steady employment and the lender will have the evidence needed to approve a loan.

Is my credit profile solid?
Just like employment, lenders want evidence of a solid "track record" when it comes to paying bills. Are your bills always paid on time or even a little early each month? Consistent late payments raise a red flag and can tarnish a credit history.
Lenders also want to know your total amount of outstanding debt. How much was borrowed and how many months or years remain before it is repaid?
Credit bureaus — Experian, Equifax and Tran Union — will detail credit card usage, the extent of debt and report a payment history. Even without a big-ticket item, such as a car or student loan, credit bureau records show if rent, electricity, water and gas were paid on time.
The better the credit history, the more likely a home loan will be issued with favorable terms. The more blemishes — late payments, overspending, multiple credit card usage with each pushed to the credit limit, judgments, liens or bankruptcies — the greater the impact on a borrower’s ability to obtain a home loan. A clean, solid credit history reassures the lender that you, the borrower, take your financial obligations seriously and that you manage money wisely.

Do I have funds for the down payment and closing costs?
Not long ago, saving for a down payment was a hurdle for many prospective homebuyers. It remains significant today, but more so now, than any time in recent history, there are now unique loans, special programs and government agencies that can help lower the down payment to 5% or sometimes as low as 3%, even 0%, especially for first time buyers and if the above questions are answered positively.
Nonetheless, coming to the home buying process with some savings increases the odds of landing a favorable home loan and greatly improves a buyer’s bargaining position. How much savings is needed depends on the cost of the home you hope to purchase, but figure on a at least a 5% down payment plus closing costs ranging from 3 % to 6% of the purchase price. Translation? About $30,000 for a home in the $200,000 price range.
Absent any savings or relatives who can help out, it might be wise to delay researching for a home. Instead, create a budget that includes stashing a fixed amount every month into a savings account. Consistent savings yields an added benefit — it further improves a prospective borrower’s credit history, ensuring a favorable result when an application is submitted.

Can I afford the monthly mortgage?
There are variations and exceptions, but generally the monthly home loan payment is limited to 28% of gross monthly income. Monthly debt should not exceed 36%. Those numbers provide a range for the monthly mortgage payment you can afford. With interest rates today at the lowest point in more than 30 years, housing dollars can go much farther.
The price you afford to pay for a home will depend on six factors:
Your gross income
The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
Your outstanding debt
Your credit history
The type of mortgage you select
Current interest rates

What can I afford?
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders do not want borrowers that spend 28% of their gross income per month on a mortgage payment or more than 36% on debts.

Pre qualification
It pays to check with several lenders before you start searching for a home. Most will be willing to roughly calculate what you can afford and pre-quality you for a loan. A pre-qualification is an informal discussion between borrower and lender. It involves a simple calculation that considers several factors. There are no guarantees with a pre-qualification, but it will be expected of you when you make an offer on a home.

Principle, Interest, Taxes and Insurance payment (PITI)
Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is calculated using your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance. This is known as the Principle, Interest, Taxes, and
Insurance payment (or PITI). If you have to pay monthly homeowners association dues and/or private mortgage insurance (PMI), this also will be added to your PITI. This ration should fall between 28% and 33%, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34% to 38% range.

Debt-to-income ratio
A standard ratio used by lenders limits the mortgage payment to 28% of the borrower’s gross income and the mortgage payment, combined with all other debts, to 36% of the total. The fact that some loan applications are accustomed to spending 40% of their monthly income on rent — and still promptly make the payment each time — has prompted some lenders to broaden their acceptable mortgage payment amount when considered as a percentage of the applicant’s income. Other real estate experts tell borrowers facing rejection to compensate for negative factors by saving up a larger down payment. Mortgage loans requiring little of no outside documentation often can be obtained with down payments of 25% or more of the purchase price.

Previous bankruptcies and foreclosures
Bankruptcies/foreclosures can remain on a credit report for seven to ten years. However, some lenders will consider an applicant earlier if he or she has reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lenders’ decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you have overextended your personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

What should I do to get my finances in order?
Before you start looking for a new home, get a copy of your credit report. According to a recent study, one-third of Americans have enough inaccurate information in their credit files to prevent them from getting a mortgage or other large luxury loan. If the report contains errors, the lender might automatically reject your loan request.
Correcting even the smallest error can take at least two weeks. Correcting bigger mistakes can take months. You may be the victim of credit fraud and not even know it. Professional thieves can open checking/credit accounts in your name without you even knowing it. Credit fraud usually doesn’t appear on your credit report until after the debt had gone into collection. Even if the purchases occurred in states you’ve never even seen yourself, it is your responsibility to contact the credit bureaus, and even the companies trying to collect the debt. Follow up; the error might not get cleared up the first time, and if you’ve been defrauded once, you’re likely to be defrauded again.
Order a copy of your credit report from each of the three major nationwide credit reporting bureaus: Experian/TRW (888) 397-3742, Equifax (800) 685-1111, and TransUnion (800) 888-4213. Each service will charge for a report. If you are turned down for credit, you are entitled to one free copy of our credit report.

What is the true value of a home?
A home is worth what someone will pay for it. Everything else is an estimate of value. To determine a property’s value, most people turn to either an appraisal or a market analysis.
An appraisal is a certified appraiser’s estimate, appraising the amenities, energy efficiency, the quality, and value of a home at a given point in time. To make their determination, appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account.
The list price is the price tag put on a house in a real estate listing; it usually is only an estimate of what the seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and based on market conditions.
The appraisal value is a certified appraiser’s estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Appraisers use several factors when estimating value including historical records, property performance, and condition of the home and a forecast of future value.
You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor’s offices, through private companies or on the Internet. Neither of these services produces official appraisals. They also don’t factor in market nuances or other issues a certified appraiser or real estate professional might in assessing the value of your home.

Are interest rates negotiable?
Some lenders are willing to negotiate on both the loan rate and the number of points (fees paid to the lender — each point is equal to 1% of the loan) but this isn’t typical among established lenders, who have set their rates like large corporations have set the prices on their goods and/or services. Nevertheless, it pays to shop around for loan rates and to know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points to get the best deal possible.

How Do I Evaluate a Neighborhood?
When you buy a resale home, you can find out a lot more about the property and the neighborhood before you buy than when you buy a new home. Land to support new-home developments usually is located on the outskirts of town. Potential buyers should ask the developer about future access to public transit, entertainment activities, shopping centers, churches, and schools. Local zoning ordinances also should be reviewed. A rather remote area can turn into a fast food chain haven within a couple of months or years down the road. Try to ensure that the neighborhood, if not strictly residential, will not begin developing out of control.

New home warranty contracts….what do I need to know?
With home warranty contract sales for existing homes in California now part of more than nine out of every 10 home sales, it is vitally important to be aware of the top frequently asked questions and answers to assist you in contemplating the purchase of a home warranty.
Q: Which components of the home will be covered by the warranty?
A: Typically, home warranties are one-year contracts. They cover a home’s mechanical systems, including plumbing, heating, electrical, water heater and most built-in appliances that can break down or malfunction due to normal wear and tear. Do note that structural items are generally not covered.
Q: Is additional coverage available?
A: Yes. Warranty coverage can be extended to cover pool or spa equipment, air conditioner and well pump. Your warranty company will have more details in regards to what additional coverage is available.
Q: How much is the fee for a service call?
A: Typically, between $35 and $50, (approx.).
Q: What are the total dollar limits on the warranty? What are the limits for individual items?
A: Generally, there are no limits, except for certain items such as concrete-encased plumbing lines.
Q: What hours is the customer service department available to answer questions and process claims?
A: Normally, 24 hours a day, depending upon the company.
Q: Will licensed, insured contractors be used to make repairs? How long is the warranty on repairs or replacements?
A: Most contractors will guarantee their work, and for a period of time following completion of work. In the event a component is replaced, the manufacturer’s warranty takes effect.
Q: What is the typical turnaround time for a claim to be dispatched and completed?
A: When a claim is made during a normal business day, the contractor is dispatched the same day. For emergencies at night, weekend or holidays, most warranty companies offer emergency service.
Q: Can the warranty be renewed at the end of the first year?
A: Usually, the homeowner is offered a renewal, subject to the policy of the individual warranty company.
Q: What if I am not satisfied with the work completed in my home, is there a consumer complaint department?
A: The Department of Insurance hotline (213) 897-8921.

What Will My Maintenance Expenses Be?
Experts generally agree that you can plan on annually spending 1% of the purchase price of your home on repairs. An example of such repairs would be, gutters, caulking windows, sealing your driveway, and the many other maintenance chores that come with the privilege of homeownership. Newer homes may cost less to maintain than older homes, but that depends on how well the home itself has been maintained over the years.
Buying into a new home community may seem riskier than purchasing a house in an established neighborhood, but any increase in home value depends upon the same factors: quality of the neighborhood, growth in the local housing market and the state of the overall economy.

What is Private Mortgage Insurance (PMI)?
Private mortgage insurance (PMI) can help you get into the home you want by enabling you to pay less than the typical 20% down payment. This is particularly helpful for younger buyers who haven’t had years to save but want to enjoy the tax benefits and investment aspects of home ownership. PMI is insurance that pays the mortgage in the event that you can’t – or that you default on the loan. It is protection for the lender who is taking a greater risk with a borrower who has less equity. Lenders have discovered through experience and research that there is a definite correlation between the amount of money a borrower has put into the home and the rate of default on loans. The more equity, the lower the rate of default.
Here is an example of how it works: If a couple has $10,000 in the bank, then they can buy a $50,000 home if they have to pay a 20% down payment. If they don’t have to pay 20%, then that same $10,000 can be a 10% down payment on a $100,000 house or a 5% down payment on a $200,000 house. If they opt for the more expensive house, however, they have to pay for PMI. The costs for PMI are based on the loan amount. For a $100,000 loan with a 10% down payment. Currently, PMI premiums can be as high as $1,500 per year for a mortgage on a $200,000 home.
In 1998, the Homeowners Protection Act established rules for mortgages signed on or after July 29, 1999, that require the automatic termination of PMI after you have reached 22% equity in the home, based on the original property value. You can also request that the PMI be dropped when you reach 20% if your mortgage was signed after that date. If your mortgage was signed prior to that date, you can request the cancellation of PMI once you’ve reached the magic 20% mark, but your lender isn’t required by law to cancel it.
There are certain conditions that may make your loan an exception to this rule – for example, if you haven’t kept your payments current, if your loan is considered a high risk loan, or if you have other liens on the property.

The Purpose of PMI
PMI is mortgage guarantee insurance offered by the private insurance market. Lenders typically require PMI on conventional mortgages that have loan-to-value ratios of greater than 80% and are sold on the secondary market. PMI protects the holder of a mortgage from complete loss in the event that a borrower defaults on the mortgage. The mortgage insurer assumes all or part of the default risk in exchange for consideration: a premium. While the lender enjoys the protection of the PMI, it is the borrower who pays the PMI premium.

PMI Premiums: Past and Present
In the past, a significant charge for PMI was made at the beginning of the mortgage. Private mortgage insurers were charging 2.2% of the loan amount up-front to pay for private mortgage insurance. However, the premium payment structure for PMI has changed considerably during the last several years. Instead of charging the cost of PMI at closing, these premiums are spread out over the life of the mortgage. This change has made the elimination of future PMI premiums an attractive option for those who have recently financed a home with a down payment of less than 20%.
Currently, the monthly premium for PMI for the first 20 years of a 30-year mortgage varies with the size of the down payment. For a mortgage with a loan-to-value ratio of 95% (a down-payment of 5%), a typical monthly PMI premium is 0.78%/12 of the initial mortgage amount. A 90% loan-to-value ratio (a down-payment of 10%) requires a monthly premium of 0.52%/12 of the initial mortgage amount, and a mortgage with an 85% loan-to-value ratio (a down-payment of 15%) requires a monthly premium of 0.32%/12 of the initial mortgage amount. Beyond 20 years, the monthly PMI premium changes to 0.20%/12 of the initial mortgage amount, regardless of the size of the down payment. In each case, the insurer normally collects an escrow equal to two months’ premium at the beginning of the mortgage.
One interesting aspect of PMI is that, when determining the premium to be paid for PMI, the insurer normally does not take into account the true difference in default risk from one mortgagor to another. In most cases, the insured is evaluated simply as being either an acceptable or unacceptable risk. However, beyond being either an acceptable or an unacceptable risk, no consideration is given to the financial stability of the mortgagor. The premium paid for PMI is determined solely by the amount of the mortgage and the size of the down payment made by the mortgagor. (Its size affects the amount of a potential claim.) Therefore, two insurable mortgagors with equally priced homes and equal down payments pay the same PMI premium, regardless of the true default risk of one relative to the other. As a result, a mortgagor who is considered a low default risk is subsidizing the PMI premiums of other, higher default risk mortgagors.

The Value of an Investment in Home Equity
In evaluating the home equity investment decision, explore the following effects of PMI on the portfolios of two different groups: (1) those obtaining a mortgage (whether by purchasing a new home or refinancing their current home) and (2) those who already own a home and are currently paying PMI as a part of their monthly mortgage payment. Although PMI is necessary and beneficial to many individuals, we conclude that some individuals purchasing or refinancing probably should avoid paying any PMI premiums. Similarly, many homeowners who initially were required to purchase PMI should terminate the PMI as soon as it is financially feasible. Assuming that an individual has the funds needed to make the minimum down payment that is required to secure a home mortgage, another premise of our discussion is that he or she has additional cash which can be invested in either home equity or other investments. Such an individual has the option of making the minimum down payment and investing the remaining cash in other assets or making a larger down payment.
To determine the attractiveness of one investment option relative to the other, the risk and returns of both options must be estimated. Ignoring the cost of PMI and the home mortgage interest tax deduction, the after-tax return on an additional investment in home equity is simply the mortgage rate of interest. Although returns of other investments may be as attractive as the mortgage rate of interest, the risk of many of these investments may be much greater.
With the current low mortgage rates and recent gains in the stock markets, investing funds outside of the home appears to be a fairly attractive option. In addition, having the extra liquidity of cash invested in stocks or bonds provides further support for this investment strategy. Finally, taking into consideration the home mortgage interest tax deduction, is there any scenario where investing funds in home equity would be the optimal investment strategy?
While the promise of higher investment returns, additional liquidity, and the home mortgage interest tax deduction provide significant motivation for making a minimum down-payment on a home, when PMI premiums are considered, the minimum down-payment strategy becomes much less attractive.

Avoiding PMI
Compared to the rates of return that can be achieved on relatively low risk investments today, the returns on investing in home equity to avoid unnecessary PMI premiums are considerably higher. Assume, for example, that an individual has a 7.5% fixed, 30-year mortgage on a $200,000 home with a down payment of 10%. Given that the homeowner will remain in the home for the life of the mortgage and considering the current full mortgage interest tax deduction, the pre-tax rate of return needed on cash invested outside of the home is 14.51% before this option is as financially attractive as investing in home equity. In the event that the homeowner is expecting to have the mortgage for only seven years, the pre-tax rate of return needed on cash invested outside of the home is 13.88%. Unless liquidity is a significant issue to the homeowner, investing in home equity is the preferred strategy.

Terminating PMI
Given the low interest rates of the past few years, many individuals have recently purchased a new home or refinanced their existing home. Because PMI premiums are today paid over the life of the mortgage, rather than in advance, many homeowners with no plans to refinance still can save thousands of dollars by eliminating future PMI premiums.
In order for PMI premiums to be terminated, two things must occur. First, the homeowner must supply proof of the current value of the home by obtaining an appraisal. Second, the homeowner must reduce the loan-to-value ratio to 80% or below. This reduction might have occurred already as a result of principle being paid over the life of the mortgage, appreciation occurring since the purchase of the home, or a combination of both.
Assume, for example, that a home has appreciated and the loan-to-value ratio has fallen to at least 80%. The only cost required to terminate PMI would be that of an appraisal (normally between $300-$600). If the appraisal showed that the home had appreciated to the point where the loan-to-value ratio fell to 80% or below, then the borrower would simply have to notify the lender of the appraisal results and request that the PMI be terminated.
To determine the attractiveness of this option, the cost of the appraisal is simply compared to the present value of the future PMI premiums that would be eliminated by demonstrating an 80% or lower loan-to-value ratio. Only in cases where the remaining life of the mortgage is expected to be very short–perhaps as short as 3 months on a $200,000 mortgage (.0078/12 x 200,000 x 3 = $390 = the approximate cost of an appraisal–would this option not be beneficial to the borrower. Assuming that the homeowner plans to remain in the house for six months or longer, the rate of return earned on the investment in the appraisal is remarkable.
The home equity investment decision is slightly more complicated when a homeowner’s loan-to-value ratio is above the 80% needed to terminate PMI. In this case, the mortgagor must decide whether it is worth the investment in an appraisal and additional home equity in order to have the PMI terminated.
Consider, for example, an individual who assumed an 8%, 30-year fixed mortgage one year ago with a 10% down payment on a $200,000 home. Also, assume that the home has not appreciated since the purchase. Given one year of mortgage payments, the principle owed on the mortgage would have decreased by approximately $1,504. The cost to terminate future PMI premiums would be the cost of an appraisal (assumed to be $400) and an investment in home equity of $18,496.

PMI Conclusions
While PMI is necessary for those who have few resources to invest in a home, many homeowners have the option of either paying or avoiding PMI premiums. In many cases, a homeowner can realize a significant return on an investment in home equity that is sufficient to eliminate PMI premiums. Also, if the house has appreciated, or if the mortgage has been paid for several years, the cost of an appraisal is often all that is required to eliminate years of future PMI premiums.
We suggest that homeowners first consider investing in home equity (or perhaps just an appraisal) and eliminating PMI premiums as an alternative to investing in other assets. Finally, although the purpose of the examples provided is to demonstrate the returns that are possible with an investment in home equity, every individual’s situation is unique. Issues such as mortgage terms, PMI premiums, the individual’s financial condition, and his or her preferences towards such things as liquidity and risk must be considered before determining the attractiveness of an additional investment in home equity.

What is a Homeowner Association (HOA)?
A homeowner association (HOA) can have many forms and functions. Basically, a homeowner association is comprised of two or more homeowners that belong to a mandatory membership organization for the maintenance of commonly owned real estate and improvements. Size-wise, it can range from a simple duplex up to a huge development with thousands of detached homes, condominiums and townhouses that maintain marinas, golf courses and other extensive recreational facilities.
When you take ownership, your deed to the property has "Deed Restrictions" including "Declarations of Covenants, Conditions and Restrictions," better known as the CC&R’s. These CC&R’s require every owner of the property to be a member of the community association and abide by the associations documents. Such documents consist not only of the CC&R’s, but also the articles of incorporation (if the association is incorporated), by-laws, rules and regulations and the architectural or design guidelines established by the association.
A "neighborhood association" is NOT a homeowner association under this definition. A neighborhood association is a voluntary membership organization that deals with social, political, zoning, crime and does not maintain commonly owned property. Some neighborhood associations, unfortunately, call themselves "homeowner" associations confusing the issue.

What Homeowners’ Associations Typically Regulate
(Not an Exhaustive List)
House design, appearance, colors
Sheds and out-buildings
Lawns, trees, hedges, weeds
Roof shingles
Mailboxes, swing sets
Fences
Noise
Garages, outdoor lights, TV antennas
Garbage cans, vehicle storage, other storage
Views, window coverings
Pools, spas
Home businesses, pools, wreaths
Pets (size or even acceptability)

What is the Purpose of the Association?
The purpose of the association is to protect the health, safety and welfare of the community and it’s members. In other words, to maintain or increase property values of its members and to protect the assets of the association. The association, through its board, is responsible for enforcement of the Deed Restrictions which include the association documents.

Who is the HOA Board?
The board is the directors of the association elected annually by its members. (The exception is during the initial development years in which the developer is usually in control of the board.) Therefore, members of the association can control how the association operates by electing those individuals to the board who have their same interests on how the community is to be maintained.

What Can I or Can’t I Do to My Property?
First and foremost you need to read the association documents. Even if it appears to be a tedious boring task, it is critical to do so. Although the CC&R’s are the foundation in which the association operates, the architectural and design guidelines usually control the esthetics of the community and what you can or cannot do to your home or lot. Before you can change anything on the exterior of your home or lot you must (in almost all cases) submit your plans and/or specifications for architectural approval prior to making changes. This includes changing the paint color on your home.
Although slightly more restrictive, this is equivalent to submitting plans to a city for a building permit. Usually this is the most controversial subject when living in a community. When you purchase a home or lot within a community association you should expect that the esthetics of the community would stay the same or improve. You would not expect it to deteriorate and cause a loss of value to the community as a whole. In order to live in this type of community there needs to be a sense of cooperation among all the members of the community.

What Can I Do to Have My Voice Heard?
Attend regular board meetings
Present positive ideas to the board or management company
Volunteer for a committee
Help research information for the board or management company
Present solutions rather than criticisms regarding rules and regulations or other subjects that the board may want to implement
Volunteer to run for a board of director’s position

What Power Does the Management Company Have?
The management company reports directly to the board and administers the affairs of the association at the board’s direction. It has no separate power over the members and cannot make its own rules or regulations. However, cooperation with management can go a long way. Who is better suited to present ideas to the board, or provide you with the best avenue to get a change to your lot approved than the manager? Management can be an asset to your enjoyment of living in a community association. Work with them and they will work with you.

What Can I Do If I Am Unhappy Living in a Community Association?
First, re-examine why you purchased your home or lot within a community association. If it is not what you expected, then see if you can help change the way the association operates. Only taking an active role in your community affairs can do this. If you are willing to leave it up to others, then you must live with the results, good or bad.
Contact your neighbors and see if they have the same feelings. A well-organized group can accomplish more than an individual acting alone. Without support from other members of your association, you may be considered a troublemaker or just an unhappy owner.
If all else fails and you are still unhappy with the association, maybe it’s just not for you. Not everyone wants to live in a community with rules and regulations or guidelines. Maybe it is time for you to move on to an environment more to your liking.

Covenants, Conditions and Restrictions (CC&R’s)
The homeowners’ association will probably exercise a lot of control over how you use your property. Deeds to houses in new developments almost always include restrictions on how the property can be used. Usually, these restrictions, called covenants, conditions and restrictions (CC&R’s), put decision-making rights in the hands of a homeowners’ association. If you don’t understand something, ask for more information and seek legal advice if necessary.
Some associations enforce every rule; others are run in a far more relaxed way. Most associations are very sensitive to making decisions that will enhance the value of the houses.
Study the CC&R’s carefully to see if they’re compatible with your lifestyle. CC&R’s commonly limit the color or colors you can paint your house (often brown or gray), the color of the curtains or blinds visible from the street (usually white) and even the type of front yard landscaping you can do. Some even require that garages facing the street be kept neat, insist that laundry be dried indoors rather than hung on a line, prohibit basketball hoops in the driveway or front yard and prohibit parking RVs or boats in the driveway.
These rules may be fairly general, but more often they are excruciatingly detailed. Getting relief from overly restrictive CC&R’s after you move in isn’t usually easy. You’ll likely have to submit an application (with fee) for a variance, get your neighbors’ permission and possibly go through a formal hearing. And if you want to make a structural change, such as building a fence or adding a room, you’ll likely need formal permission from the association in addition to complying with city zoning rules.

Maintenance Fees
Homeowners’ associations can often assess mandatory fees for common property maintenance, which can get expensive if the development has a pool, golf course or other recreational facility. Many associations in housing developments let their boards raise regular assessments up to 20% per year and levy additional special assessments with no membership vote for a new roof or other capital improvement. If you’re on a tight budget, check the homeowners’ association membership fee and how easy it is for the board to increase the amount. Also, if parts of the development have been occupied for a while, attend a homeowners’ association meeting and talk with the officers about financing and other issues of concern.