Make your dream of buying a house in the Aloha state a reality! Click through to see the latest mortgage rates in Hawaii and to learn more about the home buying process.
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It's no surprise that homes in Hawaii are in demand – after all, who wouldn't want to live in a tropical paradise? But if you want to purchase a property in the state, you have to be ready to face tough competition.
To help you gain an advantage, follow the steps in this guide. We'll also give you access to Hawaii mortgage and refinance rates, so you can get the best deal on your home purchase!
Mortgage Loan Options In Hawaii
Before you can buy a house in Hawaii, you need to explore your mortgage options. The type of home loan you choose will have an effect on the mortgage rate, the minimum down payment (DP) amount, and the borrower qualifications.
In general, you can choose between the following:
Conventional Loans
Conventional loans are those that are not secured by a government entity. They're ideal for borrowers with good credit as well as those who can make a 20% DP. Most lenders and banking institutions will require you to pay for private mortgage insurance (PMI) if your DP is lower than this amount.
Conventional loans also include jumbo loans, which are mortgages with loan amounts that are above the limits set by the Federal Housing Finance Agency. You can use a jumbo loan to purchase a property with a very high home value.
Government-Backed Loans
Government-backed mortgages are those that are insured by a federal entity. They come with more lenient credit requirements as well as lower interest rates.
Some of the most common types include:
- Federal Housing Administration (FHA) Loans: FHA loans are designed for low-to-moderate-income borrowers. If you have a credit score of at least 580 and can make a down payment of at least 3.5% of the home price, you may be approved for this loan. However, you can still be eligible for an FHA loan with a lower credit score if you can put in at least 10% of the purchase price.
- US Department Of Agriculture Loans (USDA) Loans: USDA loans are designed to boost homeownership in eligible rural and suburban locations. Borrowers can get this type of loan without making a down payment.
- Department of Veterans Affairs Loans (VA) Loans: VA loans are offered to members of the military, veterans, and their surviving spouses. Like USDA loans, VA loans do not require a down payment. However, borrowers are required to pay closing costs and VA fees.
Loan Terms
Aside from choosing the loan type, you have to decide on loan terms. This determines whether the rates can change. It also has an effect on how much the mortgage rates will be.
Generally, you can pick from the following:
Fixed-Rate Mortgage
A fixed-rate loan has an interest rate that doesn't change. As such, your monthly mortgage payments will stay consistent throughout the life of the loan. However, keep in mind that your property taxes and insurance premiums may still change.
Typically, you can pick from a 15-, 20-, or 30-year fixed-rate mortgage. The longer the term, the higher the interest rate will be.
Adjustable-Rate Mortgage
Adjustable-rate mortgages (ARM) come with an initial fixed period. Once that period ends, the ARM rate will adjust based on a specific market index chosen by the lender.
Compared to a fixed-rate mortgage, ARMs come with a lower initial mortgage rate. So, if you're aiming to pay less during the first few years, this may be ideal for you. Just keep in mind that your mortgage rate may increase when the fixed period ends.
Mortgage Refinancing
Homebuyers have the option to refinance their mortgage after a few years. A refi pays off an existing home loan and replaces it with a new one. Most people refinance to take advantage of lower mortgage rates, cash in on their home equity, or change their loan terms.
Today's Mortgage Rates In Hawaii
Mortgage rates in Hawaii tend to be lower than the national average. Check the table below to see the latest interest rates for all major lenders in the state.
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If you want personalized mortgage rates, use the calculator at the top of this page. Just enter your financial information, and we'll provide you with personalized Hawaii mortgage and refinance rates.
You should also review each lender's annual percentage rate (APR). The APR includes the mortgage rates plus other charges, such as points and lender fees – providing a more complete picture of how much you will pay for your mortgage.
Homebuyer Assistance Programs in Hawaii
With home prices rising steadily in Honolulu and other major cities in Hawaii, it's smart to take advantage of homebuyer assistance programs available in the state. Here are some of your options:
Hula Mae Program
The Hula Mae program is designed to help low to moderate-income borrowers purchase single-family homes, condos, and townhouses in the state. Just keep in mind that if you sell the property for a profit within nine years or if your income range has increased eligibility limits, you will be subject to a federal tax increase.
For more details, you can check the information published by the Hawaii Housing Finance and Development Corporation.
DHHL Streamline Refinance Loan
This loan program enables borrowers to lower their monthly payments through refinancing or extending the loan repayment period. It has minimal documentary requirements and no loan fees.
Steps To Buying Real Estate In Hawaii
Buying a house isn't as simple as looking for a home online and making an offer. To purchase a property in one of Hawaii's beautiful islands, follow these steps:
Step 1: Prepare Yourself Financially
Before taking out a mortgage, you need to evaluate your finances. Specifically, you need to look at the following:
- Credit: In general, banking institutions and online lenders will require you to have a credit score of 620. If you have poor credit, check if you're qualified for government loan programs that will enable you to take out a mortgage.
- Debt-to-income ratio: Ideally, you should only spend less than 36% of your income on debt, including the monthly payment for your future mortgage.
- Savings: Most lenders require that you put down at least 20% of the loan amount. If you're unable to pay this much, you need to pay for mortgage insurance.
- Closing costs: Borrowers usually need to pay closing costs, which can reach up to 2% to 5% of the home purchase price.
Step 2: Get Preapproved For A Mortgage
The next step is getting a preapproval letter. Completing this step will show sellers that you are serious about purchasing a home and that you can afford future mortgage payments.
Check mortgage rates on our website to see which lender can offer you the best deal. Once you've chosen a lender, send them your financial information to request a preapproval letter.
Step 3: Look For A House In Hawaii
Now, the fun part begins! Find a realtor who can help you find an ideal home in Hawaii. They can look for homes within your budget while making sure to tick boxes on your wishlist. They can also help you explore options outside of Honolulu, in case you're interested in other cities or islands.
After you find an ideal home, you can get your realtor to draft an offer. They can also help you negotiate with sellers so that you can outbid other buyers in Hawaii.
Step 4: Get Approved For A Mortgage
If the seller accepts your offer, congratulations! All you have to do now is to apply for a mortgage. You can move forward with the lender that gave your preapproval letter or you can look for other lenders that are licensed in Hawaii.
Check the annual percentage rate for various lenders again to see which one offers the best deal. Then, get in touch with mortgage loan officers to begin the process. Usually, you will need to submit personal and financial documents.
Note that most sellers require mortgages to close within a certain period or else they will offer their properties again to other buyers.
Step 5: Close The Mortgage
The last step is closing the deal. Depending on the type of mortgage you applied for, this may involve paying closing costs and other fees.
Once everything is in order, you'll get the keys to your new Hawaii home. Time to pack your bags and move in!
How To Get Lower Hawaii Mortgage Rates
Every mortgage is composed of two parts: the principal and interest. While you don’t have much control over your principal, interest varies from person to person, and from lender to lender. Even a small reduction in interest rate can help you save a lot of money on your home purchase.
Here are few ways you can lower your interest payments:
Choose Shorter Loan Terms
Lenders generally prefer borrowers to their loans as quickly as possible. So, they offer lower mortgage rates to people who opt for shorter terms, such as 10-year or 15-year mortgages versus a 30-year fixed loan.
Buy Discount Points
Purchasing discount points (a.k.a. mortgage points) is one of the most common ways to reduce your mortgage rate. Typically, you can purchase points from your lender for 1% of the loan amount. The interest rate reduction for each point depends on the lender.
Improve Your Credit Score
Borrowers with good credit are generally rewarded with lower interest rates. Before applying for a mortgage, you can do the following to boost your credit score:
- Pay off credit cards and student loans.
- Pay your bills on time.
- Avoid taking out new loans.
- Avoid closing old bank accounts.
Closing Thoughts
Getting real estate in Hawaii doesn't have to be a fantasy. Follow the steps in our guide to learn how you can get the best deal on your home purchase and make that dream a reality!
For more mortgage resources or advice on getting low interest rates in Hawaii, get in touch with Wesley LLC! We'll bring you one step closer to your island paradise homeownership dreams.