Your Guide to Buying a Home in Hawaii

• In the state of Hawaii, real estate transactions are usually closed by an escrow agent or a title company. 
• There are rules in Hawaii stating that only attorneys can prepare closing documents. 
• The buyer’s funds and the purchase contract are held by a third party. 
• Hawaii has leasehold and fee simple properties that make the transaction process unique from other states. 
• If your purchase involves a leasehold or fee simple property, it’s best to get additional advice from a qualified expert. 

Phase 1: Negotiations for Your Hawaii Property

Once you have reached an agreement on a purchase price, there are still many steps that you need to complete. In most situations, these can be completed at the same time as Phase 2 (the mortgage). 

1. First, you will have an offer accepted by the seller and a contract will be signed. This launches the escrow process. 
2. As the buyer, you will need to deposit the earnest money, which should have been agreed upon during the initial negotiations. This deposit is given to an escrow representative or an attorney, never to the buyer. 
3. You will now receive disclosures from the seller. The seller has a certain amount of time to disclose any known issues with the property, such as needed repairs or past maintenance. You will need to sign an acknowledgement of these disclosures by a certain date. If there are any additional property defects or changes, the seller is required to report these issues. 
4. You now have a certain amount of time to complete inspections. In Hawaii, you may choose from a variety of inspections, including a general inspection by a licensed home inspector. Termite, mold, radon, and other inspections may be recommended as well. 
5. If any problems are uncovered during the inspection process, you can ask for changes to the contract. This can include an adjustment to the sale price or repair to the property. The seller has an opportunity to accept the request, reject the request, or offer a negotiated settlement. Negotiations usually occur until an agreement is reached. 
6. During the negotiations, you may want to complete a property survey and other measures, such as staking. A well inspection may also be required before the transaction can be complete.
7. If the home was built before 1978, a lead-paint inspection may be mandated to complete the sale.
8. You may also request that the seller fund a home warranty. This warranty covers the cost of replacing appliances for a certain period, usually about a year. 

Phase 2: The Mortgage

While you may have been pre-qualified or pre-approved, you’ll need to complete final approval for the Hawaii home loan. 

1. You’ll start this process by submitting a formal loan application. This can be done on your own, but most prefer to complete this step with the help of a professional. 
2. The lender will send a “Good Faith Estimate” that states the estimated costs for closing the loan. The final number may vary, but lenders do their best to make it as accurate as possible. 
3. The lender will submit a request to the title company. A title search will be completed to make sure the property can be sold without complications from other owners. 
4. You will now have to send a variety of information to your Hawaii lending officer or agent. Requested documents may include: 

• Bank statements from all accounts you own.
• Information on outstanding debts, lines of credit, and other financial liabilities. This could include car payments, credit card debt, student loans, and tax obligations. 
• Documents for your past rental history,
• Two years of tax returns. These are usually released to the lender using a specific IRS form.
• Recent pay stubs showing your income. The amount of paystubs requested by your lender will vary. 
• Financial information that impacts your income or cash flow. Examples include alimony, legal settlements, liens, divorce decrees, and child support. Whether you receive or pay money, it should be included. 
• Explanation of recent credit inquiries.
• Information on cash gifts or other large deposits. If a lender sees a large deposit, they want to know if that money is a gift or a personal loan. If it is a gift, they may request a “gift letter” which outlines the nature of the deposit, who is giving the money, and a statement that the cash is strictly a gift and repayment will not be required. 
• Repeat information on any of the above documents. The more information you can bring, the better, so don’t be surprised if they ask for repeat or updated information. 

5. Once your lender has the documents, you should receive word on their decision. 

6. Assuming you are approved, an appraisal is ordered. This helps the lending institution verify that the home they are lending against has significant value on the open market. This is an important step, as the home acts as collateral against the loan. 

7. Homeowner’s insurance is now purchased. You’ll have to provide proof of this insurance to the lender. 

8. Hazard insurance may be required, and there could be unique home insurance requirements, such as storm insurance, for your Hawaii home. 

This process can be long and tedious, so it’s best to start early and compile your documents as soon as possible. Also, avoid changes to your financial situation, as they can complicate your mortgage application.

Phase 3: The Closing 

Now it’s time to finally close your purchase. In Hawaii, the closing process can take longer; sometimes as long as a week. This is generally longer than other areas. 

Usually the process looks like this…

1. The buyer will send the final loan documents to the escrow agent and the closing date is scheduled. 
2. The final walkthrough is completed to make sure the property is still in good order and safe condition. 
3. The closing convenes at the office of an agent or attorney. This is when the buyer will sign all documents. 
4. The buyer may sign the documents at a different time. 
5. The buyer now pays the remaining fees and costs. The can be done a few days in advance to speed the process. 
6. The deed will now be recorded with the appropriate municipality.
7. The transaction is complete and the buyer can receive the keys to their new Hawaii home!

Conforming Loan Limits in Hawaii

The limits for conforming loans are set by the FHFA. These limits apply to many programs, including FHA, VA, and USDA loans, and they often have details that make them more accessible and affordable to homeowners. All things the same, it’s usually helpful to have a conforming loan whenever possible.

But these loans have limits, which are determined on a county-by-county basis. 

Hawaii is a unique state for conforming loan limits. The entire state is under the largest conforming loan limits possible. From Hawaii County in the east, known as the “Big Island,” to Kauai County, which is furthest to the west, the limit for a single-family home is $970,800. For perspective, the baseline limit in the U.S. is $647,200. 

The limit for a two-unit property is $1,243,050, while the limit for a three-unit is $1,502,475. If you want to invest in a four-unit property, the conforming loan limit is $1,867,275 across the entire state of Hawaii.

If you need a loan that is higher than these amounts, talk to our team about jumbo loans in Hawaii.

Hawaii Downpayment Assistance Programs

With some of the most expensive housing in the nation, Hawaii residents often struggle to save for a downpayment. Fortunately there are downpayment assistance (DPA) programs that can help buyers enjoy the benefits of homeownership.

Downpayment Assistance Across Hawaii

The state government in Hawaii does not have an official downpayment program. However, there are non-profit organizations that provide support throughout the entire state. The largest and best-known is the Hawaii HomeOwnership Center, or “HHOC,” which helps people who are purchasing a home or refinancing their mortgage.

HHOC’s Down Payment Assistance Loan (DPAL)
The HHOC offers this program to all qualifying borrowers who are purchasing an eligible property in Hawaii. It serves low- and moderate-income buyers by providing low-downpayment mortgages. With this program, buyers can secure a mortgage with only a 3% downpayment, which is lower than many loans, which often require at least 5%.

HHOC’s Deferred Closing Costs Loan
This program offers a 15-year deferred loan with no interest and no monthly payments. The funds from this program can be used toward a downpayment or closing costs, and the program is available to anyone earning less than 120% of the area’s median income. (So you can be above the median income and still use the program.)

City and County Programs for Hawaii Residents

While we can’t go over every single DPA program in Hawaii, here are a few examples of programs that are supported by city and county governments…

Maui County
Maui County provides downpayment assistance up to $30,000 or 5% of the purchase price. It can support the purchase of a single-family home, multi-unit property, and even a residential lot with plans to construct a dwelling. They can be structured as grants that only need to be repaid under certain conditions.

Honolulu (City and County) Down Payment Loan Program
The government in Honolulu uses taxpayer funding to support a downpayment assistance program that provides up to $40,000 in assistance for buyers in Oahu. The assistance is a loan that needs to be repaid, but the financing comes with no interest.

These are just two examples of local DPA programs from area governments. If you need downpayment assistance in your specific Hawaii city or region, contact our team today.

Common Requirements for Hawaii Downpayment Assistance

The most common requirement is income; most programs require that your income is below a certain amount, such as the area’s average or median earnings. They also require that you live in the home for a certain period and agree to use it as your primary residence. Some may also require first-time homeowner’s education, and many prefer that you use some personal savings on the purchase. (Usually around $500 to $1,000 of personal savings.)

Need help finding downpayment assistance in Hawaii? Contact our staff and get up-to-date information on low-downpayment loans and DPA programs in your area.