Red Flags When Buying a Condo: What VA Buyers in Hawaii Must Know
Red flags when buying a condo often have nothing to do with the unit itself and everything to do with the HOA, building finances, and loan eligibility. For VA buyers in Hawaiʻi, missing these red flags can lead to loan denial, surprise costs, or resale problems—even when the price looks affordable.
This guide breaks down the most important condo red flags, with special focus on VA loan rules and Hawaiʻi-specific risks.
When buying a condo, the biggest risks are hidden in the HOA’s finances, insurance, maintenance, and rental makeup—not the unit’s appearance. VA buyers face additional hurdles because condo projects must meet VA eligibility standards, and high HOA fees can break VA residual income, especially in Hawaiʻi.
Condo buyers should watch for HOA financial problems, high fees, litigation, deferred maintenance, and rental-heavy buildings. VA loans add extra requirements, and in Hawaiʻi, high HOA dues often cause VA residual income failures even when price and credit look fine.
Key Takeaways
- Condo red flags are usually financial or legal, not cosmetic
- HOA health matters more than unit condition
- VA loans add project-level approval rules
- High HOA fees can kill VA residual income
- Many Hawaiʻi condos fail VA loans due to HOA issues
- A condo can look affordable and still be a bad buy
1. HOA Financial Instability
An HOA with weak finances can:
- Trigger special assessments
- Cause sudden HOA fee increases
- Make the condo unfinanceable
- Hurt resale value
Red flags include:
- Low reserve funding (often below ~70%)
- Operating deficits
- Reliance on special assessments
- No recent reserve study
For VA buyers, poor HOA finances often mean project ineligibility, regardless of borrower strength.
2. High or Rapidly Increasing HOA Fees
HOA fees aren’t just annoying—they directly affect affordability and loan approval.
Red flags:
- HOA fees above $600–$700/month
- Steep increases over the last 12–24 months
- No clear explanation for rising costs
Hawaiʻi Reality
Many Hawaiʻi condos exceed $1,000/month HOA, which:
- Shrinks buying power
- Breaks VA residual income
- Limits future resale demand
3. VA Loan–Specific Condo Red Flags
VA loans evaluate the entire condo project, not just the buyer or unit. These issues are among the most common causes of VA loan denial.
3a. Condo Project Is Not VA-Approved (or Approval Lapsed)
Why it matters:
Most condos must be VA project approved.
Red flags:
- HOA cannot confirm VA approval
- Approval expired and not renewed
- Prior approval revoked
Impact:
- VA loan denied
- Smaller future buyer pool
- Lower resale value
3b. Excessive HOA Dues
VA underwriting counts HOA fees dollar-for-dollar against VA residual income.
Common issue in Hawaiʻi:
Buyers pass DTI and credit checks—but fail VA residual income solely due to HOA.
3c. High Percentage of Rentals or Short-Term Rentals
VA loans limit investor concentration.
Red flags:
- Short-term rentals common
- HOA does not track owner occupancy
- Investor-heavy buildings
Once rental thresholds are exceeded, VA financing can be blocked entirely.
3d. Active or Pending HOA Litigation
Certain lawsuits make condos ineligible for VA loans, especially:
- Construction defect cases
- Structural or safety litigation
- Insurance disputes
Even strong borrowers cannot override this.
4. Deferred Maintenance & Structural Concerns
Cosmetic upgrades don’t matter if the building itself is deteriorating.
Red flags:
- Concrete spalling
- Rust stains (rebar corrosion)
- Cracks in slabs or walls
- Aging plumbing or electrical systems
- Failing elevators or fire systems
Hawaiʻi-Specific Risk
Salt air accelerates corrosion, making older high-rises especially risky for VA approval.
5. Inadequate HOA Insurance Coverage
VA guidelines require adequate hazard and liability insurance at the project level.
Red flags:
- Coverage below replacement cost
- High deductibles with no reserves
- Gaps between HOA and unit-owner policies
Insurance issues can cause last-minute loan denial.
6. Pending or Undisclosed Special Assessments
Special assessments are mandatory and can destroy affordability.
Red flags:
- “Proposed” assessments not documented
- Upcoming major repairs
- Vague answers from HOA
Example:
A $25,000 assessment over 36 months = ~$700/month extra out-of-pocket.
7. Unstable or Restrictive HOA Rules
Governance issues often predict future problems.
Red flags:
- Frequent rule changes
- Aggressive fines
- Poor transparency
- Inconsistent financial reporting
These issues often precede litigation or special assessments.
8. Poor Resale History
Watch for:
- Units sitting longer than market average
- Frequent price drops
- Heavy seller concessions
These often indicate hidden HOA or project issues.
VA + Hawaiʻi Condo Reality Check
With condos, VA approval depends more on the building than the buyer.
Many VA buyers in Hawaiʻi are told they “don’t qualify” when the real issue is:
- HOA fees
- Project eligibility
- Residual income math
The condo—not the veteran—is often the problem.
Authoritative Sources
- U.S. Department of Veterans Affairs – VA Lenders Handbook (Pamphlet 26-7)
https://www.benefits.va.gov/WARMS/pam26_7.asp - Fannie Mae Condominium Project Eligibility Guidelines
https://singlefamily.fanniemae.com - HUD / FHA Condominium Approval Guide
https://www.hud.gov - Community Associations Institute (CAI) – HOA Financial Health Research
https://www.caionline.org
Final Takeaway
The biggest red flags when buying a condo are financial, legal, and structural—not cosmetic.
For VA buyers in Hawaii, overlooking HOA health and project eligibility can turn a “good deal” into an expensive mistake.
Understanding condo red flags—especially VA loan–specific ones—helps veterans make confident decisions and avoid costly surprises, whether buying now or planning ahead.
