With interest rates holding steady at all time lows, first time buyers and investors alike are motivated to capture on Hawaii's real estate opportunities. The conditions are set, market timing and the right loan program align Buyers on the road to Hawaii home success. Especially for active duty military members and veterans, the Veteran's Administration (VA) Benefit is an excellent loan program to make that Hawaii home a reality. For Buyers minimizing their initial cash investment, the USDA and FHA loan programs are an excellent avenue for jumping into Hawaii home ownership. So, you might be wondering, where do I start? Here are 7 tips that lay the groundwork, a starting point to buying real estate in Hawaii:
Locate and organize your tax returns, pay stubs, and if applicable, Veteran's Administration eligibility documentation. Having these items ready to go before will save time down the road.
Magic Sands, Kona Coconut
2. The Loan
First things first, would you go to the store to buy eggs without knowing how much money you had in your wallet? No! The same goes for buying a home. Buyers need to know what they can afford, for their budget as well as what the Lender will approve.
Research and explore all the loan options available. Talking to professionals about the many different lending options will inevitably land you on the loan program that best suits your needs. Meeting with a licensed Hawaii mortgage broker is your first step. Let them know, "I want to spend $X,000 a month on my mortgage, what price range does that translate to?"
Buyers who start shopping without securing their loan program are always in for a big surprise. Our Hawaii market moves too fast to wait for a Buyer to get Pre-Qualified. The clock starts ticking once you fall in love with the house, so you'd better have the financing figured out before you go to the store to buy eggs.
3. Hawaii Lenders
You'll need a local, Hawaii-based company that is familiar with Hawaii underwriting and valuation. Many mainland lenders and underwriters have difficulty understanding our unique properties (i.e. the 1-acre lot with a 500 square foot home in Pupukea for $800,000). In Hawaii, we don't have the huge acreage with 1,000 identical spec homes that are all priced the same. Our view planes, property condition, design, and location vary from street by street.
Sticking with local underwriting minimizes the risk of closing late. It wouldn't be worth using a mainland lender and risking closing on time for a .05% point rate when the Seller's mortgage interest can be $150/day. If the Buyer needs an extension, the Seller can ask the Buyer to pay mortgage interest for every day that the transaction is extended.
4. Your Needs
How much space do you need? Which neighborhoods are you attracted to? Think about your lifestyle. Do you like going for walks to the beach after work? Do you love hiking on the weekends? Many locals prefer to live where they play on the weekends. With hobbies, like surfing, diving or motorbiking, they minimize commute time and maximize on fun time. Buying a home is an opportunity to create the life you've always wanted to live, dream big!
5. Know the Market
Once you've determined the area and property type, study the recent sales and active listings. Understanding the real estate market in terms of Days on Market and Median Sales Price will help you in submitting the winning offer. There are other Buyers out there, like you and me, looking for the same gorgeous home at a great price. Knowing the inventory well enough allows you to recognize a great opportunity and ultimately give you the edge on competing against other qualified Buyers.
6. Interview Realtors
Realtors are a mirror of their clients. If you want someone who is detail oriented and accurate, seek out that person. Selecting your Aunty's friend's sister as your realtor might not be the best strategy to getting the highest and best service.
Interview different agents and ask them how they work, their specialization, and see if you are a good fit for each other. Your home buying experience will be determined by their expertise, communication, and the trust you have in your Realtor. You deserve the best professional service; after all it's the most expensive purchase you'll make this year. You want someone who can guide you through the process effortlessly, not stumbling.
7. Begin Your Search
Dorothy, we're not in Kansas anymore, base your expectations on reality. Compared to other states, Hawaii does not have an endless supply of homes for sale. Out of the hundreds of homes for sale, there might be 10 in the neighborhood you like and 5 in your budget. It will be a process of elimination, not selection.
Our market is defined by limited developable land, high construction costs, and extraordinary demand. The world is watching and wanting all things Hawaii. Understanding these factors at the beginning, combined with being prepared, sets Buyers up for success and positive real estate experience.
Yes, there might be a little competition, multiple offers, and a few bumps along the way, but have fun, enjoy the process. At the end of the day, when you open the door to your new home, you'll be proud you've created a one of a kind, custom designed Hawaii Life for you. Happy hunting!
Pipeline, North Shore Oahu
Wanting to Use Your VA Benefit?
If you are looking to use your VA Benefit on the purchase of a condo be sure to check the VA Website for the Approved Condo List. Also, when looking at single family homes on a CPR or flag lot, especially in Kailua and Kaneohe communities, the purchase requires VA Project Approval of CPR documents from the original landowner.
The VA review process can take anywhere from 3 to 6 weeks and may require additional time to close, extending beyond the average 45 day closing. Knowing this at the beginning will save a lot of time and headache. Let me know how I can be of service!