First Time Home Buyers in Hawaii

Buying your first home in Hawaii is an exciting step in your life. Since you’re new to the home buying process, you probably have a few questions, like who’s the best mortgage lender? 

To help, we’ve created a guide to walk you through everything you need to know about mortgages as a first time home buyer in Hawaii.

Best Mortgage Lenders in Hawaii for First Time Home Buyers

Now that you understand how the mortgage process works for first time home buyers, it’s time to search for your mortgage lender. We’ve compiled a helpful list of the top lenders in Hawaii.

The Housing Market in Hawaii: An Overview

To start, it’s important to know a bit about the realty market in the Aloha State, so you understand the average prices of homes in your area.

Here’s a quick look at the Hawaii market with median home values in top cities:

Total households: 403,240

Median list price: $610,000

4 most expensive cities in Hawaii to buy a house:

• Kaneohe: $840,697
• Lahaina: $771,404
• Kahului: $748,357
• Honolulu: $682,004

3 most affordable cities in Hawaii to buy a house:

• Hilo: $367,155
• Kailua: $606,153
• Kihei: $626,878

Looking at median home values can help you prepare for typical prices on homes in the area of Hawaii you’re looking to buy in.

Preparing for a Mortgage

Preparing for your mortgage application ahead of time can help you save time during the application process. We’ll guide you through this process and share some additional insights along the way.

First Time Home Buyer Mortgage Process in Hawaii

You’ll want to take a look at your finances before you begin the home loan application process. Knowing what you can afford can help you better determine which lender and mortgage type is best for you.

To begin, you should know: 

• How much down payment you can afford: Some mortgages allow you to put down a small down payment (like 3%), but others require the traditional 20% down payment. Knowing how much you can afford will help you figure out which mortgage lender and home loan fit your budget.
• Your credit score: Lenders look at your credit score when deciding whether to approve your home loan application. If you know your score ahead of time, you can compare that to lenders’ minimum requirements to find the right mortgage for you.

Now that you know more about what type of mortgage you can afford, you can begin the application process. Here’s what you should have on hand when applying.

• Your Social Security number
• Your past 2 years of tax information
• Your past 2 months of pay stubs 
• Your banking account balances (checking, savings, retirement and other investment accounts)

Before choosing a lender, you should also know their minimum credit score requirements. Here are a few minimum credit scores from popular lenders in Hawaii.

Depending on the lender you choose, you might need to provide additional documents. 

Mortgage Options

The next thing all first time home buyers in Hawaii should know is the different types of mortgages available. Each type has its own requirements and benefits, so we’ll take you through the 5 most common mortgages to help you find the right fit. 

Conventional Loan

Conventional home loans are mortgages backed by banks or credit unions. This type of loan has a higher interest rate since the loan isn’t backed by the government. Many conventional loans have low down payment options (3%) and more flexible requirements, making these loans a good option if you have a low credit score or can’t afford a large down payment.

FHA Loan

FHA home loans are mortgages backed by the Federal Housing Administration (FHA), designed with first time home buyers like you in mind. This type of loan has lower-than-market interest rates, low credit score requirements (starting at 580) and low down payment requirements (starting at 3.5%). Most conventional lenders offer FHA loans.

USDA Loan

USDA home loans are mortgages backed by the U.S. Department of Agriculture (USDA), designed to finance homes located in rural areas in Hawaii. Most homes outside of major cities are eligible for USDA loans. This type of loan has lower-than-market interest rates, low credit score requirements (starting at 640) and no down payment requirement (in some cases). Most conventional lenders offer USDA loans.

VA Loan

VA home loans are mortgages backed by the U.S. Department of Veterans Affairs, designed to help current and former members of the military afford home financing. This type of loan has lower-than-market interest rates, no set credit score requirement (though lenders may set one) and no down payment requirement. VA-only lenders and most conventional lenders offer VA loans.

Jumbo Loan

Jumbo home loans are either conventional or FHA mortgages that are used to finance homes with a list price over $484,350 (limits may be higher depending on your location). This type of loan typically has higher down payment and credit score requirements. Expect to pay around 20% in down payment costs through most lenders. Many online lenders, like Quicken Loans®, only require 10% down on jumbo loans.

First Time Home Buyer Programs in Hawaii

The Hawaii Housing Finance and Development Corporation (HHFDC) offers 2 programs designed to help make buying your first home more affordable in the Aloha State. Here are the options you should look into:

• Affordable Resale Program: This program allows eligible buyers in Hawaii to purchase a home owned by the HHFDC at lower rates than standard housing. Homes cost between $250,000 and $500,000 and range from studios to 3-bedroom units. To qualify, you must meet the HHFDC’s income requirements and the property must be your primary residence.
• Mortgage Credit Certificate: The other option the HHFDC offers is a mortgage credit program, which helps reduce the amount of federal taxes low-to-moderate income families pay. You’ll need to meet HHFDC income requirements to qualify. 

Current Mortgage Rates in Hawaii

The interest rate on your home loan is referred to as your mortgage rate. The rate you pay on your mortgage is important because you’ll pay interest throughout the lifetime of your loan. Locking in a low mortgage rate can help you save tens of thousands in interest.

Your mortgage rate is determined by your lender based on a few key factors: your credit score, down payment amount, home location, mortgage type and mortgage term.

Your mortgage term refers to the length of your mortgage. There are 2 main types of mortgage terms: fixed and adjustable. With a fixed mortgage, you’ll pay a set amount every month for the lifetime of your loan. With an adjustable-rate mortgage (ARM), you’ll pay a set amount for your introductory period. After that, your monthly payment and mortgage rate will fluctuate based on the real estate market.

To get a better idea of what you can expect your mortgage rate to be, we’ve put together a list with the median mortgage rates in Hawaii for 3 common mortgage terms. Keep in mind, rates can vary greatly from city to city.

Closing a Mortgage

After you’ve applied for a mortgage and been approved, you’ll move into the closing process for your home loan. Closing is the final step in the home buying process, during which you’ll sign all remaining paperwork and confirm the terms of your loan.

You’ll also take a final walkthrough of your home to confirm it’s in the agreed-upon condition before finalizing all loan paperwork. From there, you’ll meet with your agent to sign all paperwork and provide your down payment and any closing costs you’re responsible for. Afterward, you’ll receive keys to your new home.

Typically, the closing process takes between 30–45 days, but it varies greatly by lender. Online lenders like Quicken Loans®, for instance, can condense this timeline thanks to quick approvals and verifications.

Here are a few typical closing time frames from top lenders in Hawaii.

Get Ready to Buy Your First Home in Hawaii

Buying your first home is a huge milestone, so be sure to take your time to research all of your mortgage options before settling on a lender. Decide which incentives are most important to you and look for a lender who wants to help make your financial goals become a reality.