HOA loans exist for one reason: a major repair bill lands, reserves can’t cover it, and a special assessment would crush residents on fixed incomes. Roof replacements, concrete restoration, elevator modernization, pool renovations, the projects that turn into six-figure decisions overnight.
If you’ve been on a board long enough, you’ve sat through the meeting where this comes up. The bid on the table, the treasurer staring at the reserve balance, and someone quieter than the rest finally asking: what about a loan?
We recently hosted a webinar with Thomas Engblom, Ph.D., Vice President at First Citizens Bank’s community association banking division. Thomas holds CPM and PCAM designations and taught at the university level. Before banking, he managed over 2,500 units in Chicago, including the 65-story Marina Towers and properties along Lake Shore Drive. For more than two decades now, he’s been doing association loans, and last year the Bank division closed in excess of 300 million in total, including a $40 million deal in Chicago for a 500-unit property and a $30,000 loan for a tiny association in the Midwest. He’s also the current board president of a 23-story high-rise in Panama City Beach.
During the webinar, he walked boards and managers through how HOA loans work, what banks really check, and why some associations get told “not today”.
Why associations borrow money at all
Thomas calls it the green banana theory. People living in associations often refuse to create a reserve fund because, in their head, “I’m not going to be here in 10 years, why should I care?” That mindset shows up in books for decades. Then something happens and the reserve account doesn’t have the cash.
Boards usually have three options at that point: Drain the reserves and pray nothing else breaks, hit residents with a special assessment that some of them physically can’t pay or finance the work.
An HOA loan isn’t free, but it does something the other two options can’t. It splits a giant cost across years, lets you do the project all at once instead of phasing it, and protects the residents on fixed incomes from having to write a $15,000 check by June 1st.
There’s a real-world example Thomas mentioned: A townhome community in Michigan wanted to repave streets and replace roofs over a seven-year rolling schedule, because they didn’t want to raise assessments. Total projected cost, $2.2 million. They ended up taking an HOA loan instead, knocked the whole project out, and paid $1.7 million including interest. Phasing the work would’ve cost them an extra half a million because of inflation, contractor remobilization fees, and bulk-pricing they couldn’t get on tiny annual purchases.
Sometimes the cheapest path is the one with a loan attached to it.
The three products most banks offer
Banks that do association lending offer some version of numerous products. FCB has three specialized products. The numbers below aren’t fixed, but the structure is roughly industry standard.
Quick Term Loan: Up to $3 million, fixed rate, 5/7/10-year terms, fully funded at closing, no origination fee, $500 documentation fee. Built-in loan calculator on the application, ten simple questions, and funding in about three weeks from start to finish. The catch is your delinquency rate has to be under 8% (units 60+ days late, on the day of application and for the prior 12 months). Minimum 25 units. That’s it. Thomas says this product is “revolutionary,” and the reason is that it skips the usual underwriting drama for most associations that fit the box.
Standard Loan: Up to $25 million, terms from 5 to 15 years, draw periods available, delinquency threshold of 10%. This is what you use when your project is too big or your situation too complex for the Quick Term. Funding takes about six weeks. The Chicago loan was actually two standard loans bridged together, because most banks max out around $10 million per loan.
Revolving Line of Credit: Up to $250,000, based on $1,000 per unit, WSJ Prime plus 1% (5% floor). And here’s where the words matter. A line of credit is not a loan. It’s a credit card for emergencies. Thomas is blunt about it: the interest rate is high, you’re paying fees like a credit card, and it’s best used for unbudgeted operating problems, not capital projects.
During the webinar, a board member named Becky asked about a line of credit for elevator modernization. Thomas’s answer was direct: Elevators are capital. Use a Quick Term Loan, not a line of credit. The line is for when sand blows onto the pool deck after a storm and you need to pay the landscaper with a bobcat next Tuesday.
What the bank checks
The first thing boards get wrong about association loans is the collateral question. Thomas asks every board he meets with the same trick question: “What’s the bank going to take if you don’t pay?” People guess the clubhouse, the pool, the parking lot. None of those.
The collateral is the assessments themselves. The association pledges its right to collect from unit owners as security for the loan. If the loan goes south, the bank gets to enforce assessment collection. That’s it. In more than two decades doing this, Thomas says he’s never seen a bank have to do that, because the math works against default: it would take essentially the entire association refusing to pay, and even then, the board has special assessment authority. That’s why association loans are some of the safest papers a bank can hold.
The other things they check
The 25-unit floor exists for mathematical reasons: If you have a 20-unit association and one owner stops paying, that’s 5% of your assessment income gone. The math gets unstable fast on small communities.
Delinquency rates matter for the same reason: Thomas’s bank runs an annual check on every association loan they’ve issued, looking for spikes. A sudden jump usually means a new board, a changed collection policy, or an assessment increase the membership couldn’t absorb. None of those alone is a deal-killer, but they trigger a conversation.
Your HOA Loan term must match project life expectancy: You won’t get a 15-year loan for a painting project, because paint doesn’t last 15 years. If the project dies before the debt does, the association is paying for something that no longer exists.
For larger loans, the bank pulls the reserve study and stress-tests during the term of projected expenses. They want to know that the loan won’t put the association in a position where the next big repair forces another loan, on top of this one.
The four reasons HOA loans get rejected
Thomas has a “top ten” list of why associations don’t qualify. Most of those reasons fall into four real-world buckets:
Paperwork
- The Articles of Incorporation aren’t filed with the state, or nobody can find them. The UCC isn’t in good standing. So keep your HOA records accessible.
- The tax ID number is wrong (Thomas says this one happens more than you’d think, sometimes wrong for a decade).
- The bylaws don’t grant the board authority to take on debt without a unit-owner vote, and nobody read them carefully.
This is the most fixable category and also the most embarrassing one when it stops an HOA loan cold.
Financial health
- Delinquency over the threshold. Knowing how to handle HOA Late Fees is a must for this.
- Assessment increase too steep, signaling payment shock the residents won’t absorb.
- A pending or future major litigation, especially construction defect suits or insurance coverage disputes.
The bank doesn’t want to lend into a situation where the association is about to be writing legal checks instead of loan payments.
The project itself
- Scope unclear.
- No signed contract.
- Contractor too small to handle the work.
- No oversight in place.
- The term of the loan doesn’t match the asset’s life.
The bank reads contractor pedigree carefully, and so does the engineer if there’s one involved.
The people math
- Too many investor-owned units (renters skew everyone’s incentives).
- Too many units controlled by a single owner, including the developer.
- Loan burden is too high relative to unit values, which creates walk-away risk.
Thomas mentioned a 53-unit project in Minnesota that needed $6 million, would’ve doubled the value of every unit, and got declined because the loan-to-value math was upside down. The bank told the board: come up with half of it from a special assessment, show us skin in the game, and we’ll lend the other $3 million. Residents wrote checks. The project happened.
If your association has issues in two or more of those four buckets, you’ll either get rejected or get a soft “come back in 60 days after fixing X.”
The questions every board member asks
Two of them, every time. “Am I personally on the hook?” No. The association is a corporation. You’re an officer. The loan is to the entity, not to you. Even if you sell your unit the next day, your liability doesn’t follow.
“What if my neighbor doesn’t pay?” They’re not paying a piece of the loan. They’re paying their assessment, like always. If they stop, the board uses its normal collection tools, including the lawyer and a lien. The loan keeps getting paid because the association as a whole keeps collecting.
One thing Thomas flagged that boards don’t expect: the Beneficial Ownership Form. Since 2016, federal rules require two board members to disclose name, address, and a copy of a driver’s license to confirm none of them owns more than 25% of the association. Thomas puts it bluntly: Big Brother wants to know who controls that money. Boards occasionally have a member who refuses, and that’s a hard stop. No disclosure, no loan.
The new FHA rules for 2026
Starting August 3, 2026, FHA and Fannie Mae are tightening condo project eligibility nationwide. Most condo projects will need a full review for loan applications, and the headline number is this: associations must allocate at least 15% of annual revenue to reserves to qualify.
For boards that have been underfunding reserves for years, that’s a real change. Pull your last reserve study and the current operating budget. If reserve contributions are under 15% of total revenue, you have a conversation to have before the rule kicks in.
Two other things tightened: Insurance standards now expect property and liability coverage adequate to actual replacement value, which is going to surface a lot of underinsured buildings the moment a loan gets touched. Structural integrity assessments will be required in more buildings than before, especially older or larger condos.
If you’re in a state with already-strict local rules, you may be mostly fine. Most other boards have work to do before next summer.
What this means for Florida boards
This is where Florida has done some of its homework. After Surfside in 2021, the state mandated Structural Integrity Reserve Studies and milestone inspections for most mid- and high-rise condominiums. The reserve funding floor that the FHA is now imposing nationally? Florida condos and co-ops are mostly already there.
Thomas called Florida managers “ahead of the curve” multiple times during the webinar, and Daniel Bohm of COA Solutions of Florida agreed, though he was honest that it wasn’t by choice: legislation got us there, not industry foresight. Either way, Florida is unusually well-positioned for the August 2026 changes.
So if you’re a Florida board, the FHA news mostly means “keep doing what you’re already doing.” The boards that won’t be fine are the ones who’ve been kicking the SIRS process down the road, or whose milestone inspection is overdue, or whose reserve study is from 2018. Those are the ones who’ll feel the squeeze. Everyone else can largely ignore the FHA noise as long as the reserve study is current and the structural inspection is on file.
One caveat that catches Florida boards off guard. State law requires a fresh insurance appraisal every 36 months on condominium and co-op properties (statutory, not optional). Skip that appraisal and your carrier will set the value themselves, usually higher than an appraiser would, and your premium goes up with it. If you’re about to apply for a loan and your appraisal is older than three years, fix that before anything else.
Construction loans and insurance: a Florida reality check
Florida boards run into things other states don’t.
Coastal climate cuts the life expectancy of most building components roughly in half compared to inland properties. Salt air and humidity do work that nobody bills for. Thomas mentioned it during the webinar as something that still surprises him every time he writes a loan in Florida. A reserve study from a Midwest consultant doesn’t translate. A 20-year roof in Indiana is a 10-year roof in Miami Beach. That changes how the bank sizes your loan term, because the term can’t exceed the asset’s life.
Then there’s hurricane season. Most major construction in Florida happens during the rainy summer months, partly because snowbirds are gone, and partly because association documents typically prohibit major work in winter when residents are in town. Which means roofs are being opened up during peak storm risk. Concrete is curing through afternoon thunderstorms. Equipment sits exposed.
This is where the Builder’s Risk policy conversation has to happen before the contractor lifts a hammer. Daniel Bohm walked through a real case during the webinar: a contractor didn’t secure a roof properly before a heavy storm, water came through, several top-floor units got damaged, and the contractor’s insurance had to pay because the property policy wouldn’t cover damage to a structure that was already opened up. The association’s regular property insurance won’t respond to that kind of loss. Builder’s Risk is the policy that does.
If you’re about to spend $2 million on concrete restoration or $4 million on a roof in Florida, call your insurance agent before the project starts, not after. Confirm what the contractor is carrying. Confirm what the association needs to carry on top of that. And confirm what your policy actually covers during the construction window, because the answer is often “less than you think.”
How to walk into the bank ready
The boards that close their loans in three weeks are the ones who show up with the file already built. The ones that drag for three months are the ones who get a checklist from the bank and then realize the Articles of Incorporation can’t be located, the bylaws are ambiguous on borrowing authority, the delinquency report hasn’t been run in 18 months, and the insurance certificate expired.
So before you even pick up the phone:
- Pull your governing documents and find the section on borrowing authority: Does the board need a unit-owner vote? Often yes for amounts over a certain threshold, sometimes always. Read that section twice.
- Get the scope of work nailed down with the engineer: The bank wants a real number, not a wide range. Bids should be in writing, from contractors with the bandwidth to do the job in the timeframe.
- Pull out a current delinquency report: Know your number before the bank asks for it. If you’re above the threshold, fix the collections process before applying, not during.
- Organize your documents: Articles of Incorporation, your most recent annual report filing, your current certificate of insurance, your latest reserve study, and your operating budget. That’s roughly the file.
- Decide who from the board is signing the Beneficial Ownership Form: Make sure they’re comfortable disclosing the federal-required info before closing day, not the morning of.
Where Neigbrs by Vinteum fits in
Every reason an HOA loan gets denied involves one of three things: documents that aren’t where they should be, communication the board didn’t track, or delinquencies that nobody managed.
That’s basically what Neigbrs by Vinteum is for. The platform centralizes governing documents and meeting records in one secure portal, so the Articles of Incorporation and updated bylaws are never the thing slowing a loan down. It tracks resident communications and violation history with a paper trail, which matters when the bank asks how the board has handled compliance. And the delinquency reporting runs on the same dashboard as the rest of community management, so the number you give the bank is the number that’s actually on the books.
If your bylaws require a unit-owner vote on borrowing, Neigbrs handles legally compliant e-voting, which is the difference between getting unit-owner authorization done in two weeks and getting it done in two months of paper ballots.
The point isn’t that software fixes a loan application. Thomas would be the first to say no software replaces a banker. But software does fix the operational mess that turns a 3-week loan into a 3-month loan. If your board is thinking about financing in the next 12 months, getting the community’s documents and communications in one place now is the single thing that pays off most.
You can book a free demo here and one of our specialists will walk you through what your community would look like inside the platform.
Frequently Asked Questions
What’s the smallest HOA loan a bank will do?
Thomas has closed loans as small as $30,000. Most banks have a minimum unit count (First Citizens’ is 25), but no real minimum dollar amount on the Quick Term product if you fit the criteria.
Can the association pay off the HOA loan early without penalty?
Some banks charge a prepayment penalty on standard loans, because they’ve underwritten the deal expecting a certain amount of interest income. Quick Term loans typically don’t penalize prepayment. Read the loan documents carefully on this point: it’s a common gotcha that surprises boards at refinance time.
What happens if the association ends up in litigation after the HOA loan closes?
Depends on the type. A slip-and-fall doesn’t move the needle. A construction defect lawsuit against a developer, or coverage disputes with the insurance carrier, can. The bank will involve association counsel and may require additional documentation. Talk to your attorney before signing anything else.
Can we use HOA loan proceeds for storm damage or other emergencies?
Not the Quick Term or Standard products. Those are tied to a defined project scope. For unbudgeted emergencies, the revolving line of credit is the product designed for it, but interest is high. The cheaper move long-term is usually a fast Quick Term loan if the damage is large enough to qualify.
What happens if some owners pay off their share of a special assessment at sale?
The board can recast the loan with the bank. You apply the payoff against the principal, the bank recalculates, and the monthly payment drops. Thomas says about 70% of the 10-year loans he writes end up paid off in 7 years for exactly this reason.
