The Quick Read: Yes. Monthly association dues go on the payment side of the ratio, as the “A” in PITIA, and they are never subtracted from rent. Rent is divided by principal, interest, taxes, insurance and dues, so higher dues lower the coverage number for the same rent.
- Dues sit in the denominator with the mortgage payment.
- The rent number does not change because dues exist.
- Dues come from the association’s own documents, not the listing.
- Higher dues can push a file under the program’s coverage floor.
- Clearing the ratio does not mean the condo cash flows.
Condo files fail on this line more than investors expect. The rent looks fine, the price looks fine, and then the dues statement arrives. This piece walks through where the dues go, how they are verified, and what to do when they push coverage short. For the wider picture, Lendmire’s complete DSCR loans guide covers how the programs fit together.
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As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
The Formula, Plainly
DSCR is monthly rent used for lender review, divided by the full monthly housing obligation. That obligation is PITIA: principal, interest, taxes, insurance and association dues.
Write it on one line:
DSCR = rent used for lender review ÷ (principal + interest + taxes + insurance + HOA dues)
This is not the commercial formula. Commercial lending divides net operating income by debt service. Residential DSCR divides gross rent by the housing payment. Mixing the two methods is the fastest way to get a number that no lender will recognize.
A common mistake is running the ratio on principal and interest alone. That gives a falsely high result. Taxes, insurance and dues all belong in the payment.
Key Terms Defined
PITIA: principal, interest, taxes, insurance and association dues, the full monthly obligation on the property.
Rent used for lender review: the rent figure the lender counts toward qualifying, which depends on program guidelines and may reflect the lease, the appraiser’s market rent, or both.
HO-6 policy: the insurance an owner carries on the inside of a condo unit.
Master policy: the association’s building-wide insurance, paid for through the dues.
Special assessment: a charge the association levies on owners, outside regular dues, to cover a specific cost.
Warrantable condo: a project that meets agency-style standards on owner-occupancy, concentration, reserves and litigation. Non-warrantable projects fail one or more of those tests.
Why a Condo Scores Lower Than a Single-Family Home
Same rent, same price, same leverage: the condo still posts the lower ratio. The reason is one extra line in the denominator. A single-family home has no association dues. The condo does.
That extra line is not small. Dues often cover the master insurance, exterior maintenance, shared utilities and reserve funding. The investor is paying for those things either way. The lender just counts them.
So the comparison that matters is not condo price versus house price. It is coverage versus coverage. A condo with cheaper entry and heavy dues can clear a lower ratio than a pricier house with none.
Where the Rent Number Comes From
Dues do not change the rent side. The appraiser estimates market rent on a rent schedule. For a single-family unit, that is Form 1007, which Fannie Mae’s appraiser guidance says can also be used for condominium investment properties. Rates are not quoted here.
Those forms are only the appraisal tools. DSCR loans are non-QM, so the program rules come from the lenders, not the agencies. Across most programs in Lendmire’s wholesale network, the lender looks at the lease and the appraiser’s market rent and commonly uses the lower of the two. Exact treatment varies by program.
Worked Example: Only the Dues Change
Run the numbers on one deal twice. Take a condo that rents well and sits at a coverage ratio near 1.20 with no dues in the calculation. That is the flattering version, the one an investor gets by forgetting the association.
Now add the real dues. Every dollar of dues goes into the denominator dollar for dollar. Even a modest monthly increase in dues lowers the ratio in direct proportion to how much larger the total payment becomes. The effect is arithmetic, not judgment.
| Scenario | Dues in payment? | Coverage read |
|---|---|---|
| Investor’s quick math | No | Looks comfortable, near 1.20x |
| Lender’s math | Yes | Lower, possibly under the floor |
| Dues rise before closing | Yes, higher | Can flip a passing file to failing |
Where the file lands depends on the dues, the price, the leverage and the rent. The point is the direction. Dues only ever pull the number down.
What Counts as “Dues”
The base monthly figure is straightforward. The edges are where lenders differ.
| Item | How it is commonly treated |
|---|---|
| Regular monthly dues | Counted in full |
| Quarterly or annual dues | Converted to a monthly amount |
| Master-policy pass-through | Usually folded into the dues figure |
| Recurring special assessment | Some programs add it monthly |
| One-time lump-sum assessment | Often a reserves or cash-to-close issue |
| Clearly optional charges | Some underwriters may exclude them |
| Announced increase | Reviewed case by case |
Treatment varies by program, and select lenders in the network handle assessments differently from one another. Some convert an active recurring assessment into a monthly amount and add it to PITIA. Others treat a lump-sum charge as a reserves question. Even where an assessment stays out of the ratio, it still shows up in project review.
Dues count whether the landlord or the tenant ends up paying them. If the lease bundles dues into rent, the dues still sit in the payment.
What Does Not Go Into the Payment
The ratio is narrow by design. Vacancy, repairs, property management, utilities and capital expenses sit outside it. DSCR compares rent to PITIA and nothing else.
That has a practical consequence. Clearing 1.00 is not the same as positive cash flow. A condo with heavy dues can pass the ratio and still leave thin money after a vacancy month and a unit repair. Treat the ratio as a qualification test, then run your own operating budget separately.
How the Dues Figure Gets Verified
The lender does not take the listing’s number. The usual documents are:
- the association’s current dues statement
- the adopted annual budget
- the reserve study
- the condo questionnaire
- a ledger or disclosure of any special assessments
Questionnaire completeness is a common friction point. A half-filled form or a stale statement stalls the file, and a dues change between offer and underwriting changes the ratio. Ask the association for current figures before writing the offer, not after.
The Building Still Gets Reviewed
DSCR removes personal income documentation. It does not remove project risk. The lender still looks at association financials, master insurance, litigation, owner-occupancy mix and rental rules.
Warrantable and non-warrantable are agency-origin terms. Because DSCR is non-QM, lenders apply their own project review, so a non-warrantable building is not automatically ineligible. Harder blocks exist, though: mandatory rental pools, condo-hotel structures, deed restrictions and rental bans. DSCR cannot override a rental ban. For the definitions, see Lendmire’s piece How a Non-Warrantable Condo Is Defined and How HOA Dues Enter DSCR PITIA.
One contrast worth a sentence: on a conventional loan using Schedule E rental income, the agency method adds dues back as an expense in its own calculation. That is a different product and a different method. Do not assume it applies here.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Reverse Math: How Much Dues Can the Deal Absorb?
Solve backward before you make an offer. Pick the coverage ratio you need, then rearrange the formula:
Maximum dues = (rent used for program review ÷ target ratio) − (principal + interest + taxes + insurance)
Or turn it around for rent:
Minimum rent = target ratio × full PITIA, dues included
Run both at the target ratio and again at a ratio that assumes dues rise. If the deal only works at today’s dues, it is fragile. Dues are moving the wrong way across the industry. A survey from the Foundation for Community Association Research, reported by CAI, found most respondents seeing unexpected expense increases, with management fees, insurance premiums and reserve funding among the biggest drivers, and many planning to raise assessments. That was a past survey, but the pressure it describes is the reason to stress-test.
If Dues Push the Ratio Short
Several levers exist. None is a promise.
1. Put more down. A larger down payment lowers the monthly payment and can lift the ratio. It does not erase leverage caps, credit floors, reserve rules or property eligibility. On purchases, most files land at 75%-80% LTV, subject to lender guidelines.
2. Look at an interest-only period. Select lenders in the network offer interest-only structures, which lower the payment side. Terms differ by program.
3. Document the rent properly. Make sure the lease and the appraiser’s rent schedule reflect true market rent.
4. Compare a different unit or building. A lower-dues condo, or a single-family alternative, may clear on its own.
5. Ask about sub-1.00 options. 1.00 is where many select programs start. A separate path through select lenders in the network goes below 1.00, with leverage and terms adjusted.
Across the network, reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Credit expectations vary: a 620 floor exists in parts of the network, most programs want around 660, and 700+ opens the strongest leverage tiers. Everything is subject to lender guidelines and individual underwriting.
Short-Term Rental Condos
Dues enter the ratio the same way. What changes is the rent side, since short-term rental income is documented differently. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. Lendmire’s pieces on how insurance and HOA dues enter a short-term rental ratio go deeper on that structure.
Common Mistakes
- Treating dues like an operating expense subtracted from rent. They sit in the denominator.
- Believing DSCR ignores the building. The project review still happens.
- Using the seller’s old figures. Old tax bills, stale insurance quotes and listing-page dues all understate the payment.
- Assuming non-warrantable means ineligible. It does not, but harder blocks do exist.
- Ignoring a pending increase. A change before closing changes the ratio.
- Expecting a bank-style method. Banks and credit unions use an NOI approach with vacancy and maintenance factors, a different test from this one.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Frequently Asked Questions
Is it PITI or PITIA on a condo?
PITIA. The “A” is association dues, and on a condo it is part of the payment. A single-family home with no association is effectively PITI.
Do special assessments count in the ratio?
It depends on the program. A recurring assessment may be converted to a monthly amount and added to PITIA by some select lenders. A one-time lump sum is more often a reserves or cash-to-close question. Either way, assessments are a project-review issue.
Do HOA dues change the rent used for the ratio?
No. Rent comes from the lease and the appraiser’s market rent schedule. Dues only change the payment side.
What if dues increase before the loan funds?
The ratio is recalculated on the verified current figure. A higher number can drop a passing file under the program’s coverage floor, which is why early dues documentation matters.
Does a passing ratio mean the condo is approved?
No. The lender also reviews credit, leverage, reserves, the association’s financials and the property type.
Are PUD and townhome dues treated the same way?
Generally yes. Mandatory association dues go into the payment regardless of whether the property is a condo, a PUD or a townhome.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a broker arranging DSCR financing across 41 markets including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Programs are subject to lender guidelines and individual underwriting, and nothing here is a commitment to lend.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
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References
1. Fannie Mae Appraiser Update
2. CAI HOAresources: Condos and HOAs Confront Rising Insurance Premiums
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Flipper With Five Exits Get Better Terms on a DSCR Pool? · How to Refinance Eight to Twelve Hard Money Rentals Into DSCR · How a DSCR Lender Underwrites a Pool of Luxury Rentals
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.