How do we get a bank loan for an HOA project?

By OurHOA · General information · Revised November 5, 2026

How an HOA board gets a bank loan for a big project: check borrowing authority, size the dues line, win the owner vote, and build the lender package.

Part of the HOA board handbook: treasurer and money.

The short answer

Confirm the association is allowed to borrow and to pledge its assessment income. Size the loan against a dues line owners can carry. Get whatever owner vote the declaration requires. Then take a complete package to two or three lenders that make association loans. Do it in that order. A bank will ask for the vote and the authority before it underwrites anything, and a board that shops rates first often learns late that its declaration requires a supermajority owner vote. Whether a loan beats a special assessment is covered in our guide on whether an HOA can borrow money. This guide assumes the board has decided to borrow and walks through getting it done. Rules vary by state and by each community's governing documents, and this is general education, not legal advice. Have the association's attorney read the loan documents before anyone signs.

Check the power to borrow and to pledge

Borrowing and pledging are separate questions, and lenders care most about the second one. An association loan is usually secured by the right to collect assessments, not by anyone's house. In Texas, Business Organizations Code section 2.101(6) lets an entity borrow money and secure its obligations by pledging its property or income. Property Code section 209.0051(h)(9) says the board may consider or vote on lending or borrowing money only in an open meeting noticed to owners, and section 209.0064(e) bars transferring the association's receivables for any purpose other than as collateral for a loan. In Florida, section 617.0302(6) gives a nonprofit corporation the power to borrow money and pledge its property or income. Section 720.316(1)(k) adds an emergency power to borrow without owner approval after a declared emergency. In Colorado, section 38-33.3-302(1)(e) lets the association incur liabilities, but section 38-33.3-302(1)(n) allows assigning future assessment income only to the extent the declaration expressly provides. If a Colorado declaration is silent on that, the lender may not have the collateral it wants. A lender that asks for a lien on the clubhouse or other common land raises the bar further: under section 38-33.3-312(1), common elements can be subjected to a security interest only if owners holding at least 67 percent of the votes agree, including 67 percent of the votes held by owners other than the declarant. Then read your own declaration and bylaws for the words borrow, indebtedness, encumber and pledge. Many set an owner vote above a dollar amount.

Size the loan against a dues line

Start with the project cost, subtract what reserves can safely cover, and borrow the gap. Then turn the loan into a monthly figure per home before any owner hears about it. An illustration, not a rate quote: an 80-home association needs $400,000 to repave its streets. The reserve study says $160,000 can come out of the road fund without leaving the account short. In Florida, spending road reserves on the road is an authorized reserve use; moving money out of a different reserve, such as the pool fund, needs a majority vote of members at a meeting with a quorum under section 720.303(6)(h). The board borrows $240,000 over seven years. At 7.5 percent, the payment is about $3,680 a month, or $44,170 a year. Spread across 80 homes, that is about $552 a year, or $46 a month per home. Budget the loan line a little above the payment, 5 to 10 percent, so a few late owners never cause a missed payment. Put it in the budget as its own named line, such as "Street loan repayment, ends 2033," so owners can see when it goes away. Ask each lender what it charges before you settle on the term, because a shorter term raises the monthly line and cuts total interest.

Win the owner vote

Where the documents require a vote, owners approve the debt and the collateral, and ideally the dues line too. Colorado adds a check even without a vote requirement. Under section 38-33.3-303(4)(a)(II)(A), the board's budget is deemed approved unless a majority of all unit owners vetoes it at the noticed meeting, so a loan payment owners hate can still sink the budget. Florida's chapter 720 has no general owner veto of the budget, though section 720.303(6)(f) lets members, by a majority vote at a meeting with a quorum, fund less than the required reserves, and that vote covers one budget year only. Owners sometimes propose it to offset a new loan line, so the board should be ready to show what it does to the reserve plan. Texas's chapter 209 has no budget ratification vote, but the board's vote to borrow must happen in an open meeting. A notice paragraph to adapt: "The board proposes to borrow up to $240,000 from [lender] over seven years to repave all association streets in 2027. The loan would be repaid through a new budget line of about $46 per home per month, ending in 2033. Reserves will cover the remaining $160,000. No special assessment is proposed." A ballot question: "Do you approve the association borrowing up to $240,000, secured by a pledge of assessment income, to fund the 2027 street repaving project? Yes / No."

The lender package

Banks that lend to associations ask for much the same file. Assemble it once as a single PDF. Include the recorded declaration, bylaws, and articles or certificate of formation. Add two to three years of financial statements and tax returns, the current budget, and the latest reserve study. Include an aging report of delinquent accounts, the signed bid or contract for the project, the board resolution, and the owner vote results. Add the certificate of insurance. Under the federal customer due diligence rule, 31 CFR 1010.230, a bank must identify the people who control a legal entity customer, and a nonprofit corporation is subject only to the control prong. Expect the bank to ask for one officer's ID, usually the president's or treasurer's. That bank check is separate from the Corporate Transparency Act report. FinCEN's final rule, effective August 14, 2026, made permanent the exemption for companies created in the United States, so an HOA files no beneficial ownership report, but the bank still collects the officer's information at account opening. Lenders read the delinquency report closely, because the loan is only as good as the association's collections. Ask each lender the same questions: fixed or variable rate, term, fees, prepayment penalty, whether funds can be drawn as the contractor bills, and what covenants apply to reserves, delinquencies or dues increases.

A motion to copy

"I move that the association borrow up to $240,000 from [lender] at the terms in the commitment letter dated [date], for a term of seven years, secured by a pledge of assessment income, to fund the street repaving contract with [contractor]. I further move that the president and treasurer be authorized to sign the loan documents after the association's attorney approves them, and that the 2027 budget include a loan repayment line of $[amount]." Record the vote and the names of those voting in the minutes, and keep the owner approval results with them.

A sample timeline

Month 1: read the documents, confirm the reserve contribution, and get the project bids. Month 2: build the dues-line estimate, hold an owner information meeting, and send the notice. Month 3: run the owner vote and adopt the board resolution in an open meeting. Month 4: send the package to lenders and compare commitment letters. Month 5: attorney review, closing, and contractor start. A lender that funds on draw requests can start earlier. Leave slack. A vote that falls short of quorum the first time adds a month, and a contract signed before the loan closes leaves the association owing money it does not have.

Mistakes that cost boards

Signing the contractor agreement before the loan commits. Pledging assessments in Colorado when the declaration never authorized it, or promising a Colorado lender a lien on common land before the 67 percent owner vote. Holding the borrowing discussion in a closed Texas session. Leaving the loan out of the next budget, so the payment comes from reserves by default. Letting a board member sign a personal guarantee, which no volunteer should do without counsel's advice. Hiding the total interest cost from owners. Show it, next to what a special assessment would have been, and let them see the trade. Condo associations have one extra item: when an owner sells, the buyer's lender checks the project's special assessments under guides such as Fannie Mae's B4-2.1-03. How to run the project once the money is in hand is covered in our guide on planning a major HOA project.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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