Thanks to its breathtakingly beautiful beaches, ideal temperatures and relaxed environment, Hawaii is more than just a tourist destination. It’s a very appealing place to live.
If you’re searching for a home in Hawaii, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands of dollars over the course of a 15-year or 30-year mortgage.
- Mortgage debt in Hawaii
- Types of home loans
- Conforming loan limits in Hawaii
- First-time homebuyer programs in Hawaii
- Mortgage refinancing rates in Hawaii
Mortgage debt in Hawaii
Credit Karma members with mortgages in Hawaii had average mortgage debt of $382,019 in 2020 and average monthly mortgage payments of $1,958.
That puts Hawaii among the highest for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S in 2020.
Types of home loans
If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types Hawaii homeowners may consider.
Conventional loans in Hawaii
Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.
Hawaii FHA loans
FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.
The FHA loan limit in 2023 is generally $472,030 for a one-unit property, but it can reach as high as $1,089,300 depending on where you live.
Every metro area in Hawaii has a higher-than-typical limit — probably not surprising since the islands are tourist hotspots.
- Hilo
- Urban Honolulu
- Kapaa
- Kahului-Wailuku-Lahaina
You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.
VA loans in Hawaii
If you’re an eligible veteran or service member comparing mortgage rates in Hawaii, a VA loan can be attractive since down payments and mortgage insurance aren’t required and you may be able to qualify even if you don’t have great credit.
Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.
Conforming loan limits in Hawaii
Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, federal-government-sponsored enterprises that guarantee mortgages.
Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans.
None of Hawaii’s five counties has a conforming loan limit that matches the norm of $548,250 in 2021. Hawaii, Honolulu, Kalawao, Kauai and Maui counties all have higher conforming loan limits.
First-time homebuyer programs in Hawaii
If you’re hoping to buy your first home — or if it’s been at least three years since you’ve owned a home — there may be some assistance programs available to you in Hawaii. People with income on the lower side may also qualify for some programs.
- HHFDC Mortgage Credit Certificate — The Hawaii Housing Finance and Development Corporation offers a Mortgage Credit Certificate that can help you save money on federal taxes. To be eligible, you must buy a home in Honolulu, Maui, Kauai or Hawaii counties and meet certain purchase price and income limits.
- HHOC Mortgage Down Payment Assistance Loan Program — HHOC Mortgage, an affiliate of the nonprofit Hawaii HomeOwnership Center, has a down payment assistance program. With this program, you can buy a home with as little as 5% down and no mortgage insurance or prepayment penalty if your income is below a certain level or if you’re a first-time homebuyer. It also offers a Down Payment and Closing Cost program as a second mortgage that offers a 15-year deferred loan with no interest or monthly payments. Your first mortgage must be financed through the Hawaii HomeOwnership Center to qualify.
- County of Maui’s First-Time Homebuyer Down Payment Assistance Program — This program was created for first-time homebuyers in Maui County. This grant provides up to $30,000 or 5% of the home’s purchase price or appraised value to help cover down payments and closing costs. Recipients must have low- to moderate income and are chosen through a lottery process.
Mortgage refinancing rates in Hawaii
If you’re thinking about refinancing your mortgage, keep a few things in mind.
- Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
- Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But remember that you’ll owe the full amount plus interest, and the equity in your home will be less if you sell in the future.
- Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.