First Time Home Buyer Hawaii Guide

Ready to purchase your first home? Though homeownership comes with its challenges in Hawaii’s expensive real estate market, it’s possible with the proper knowledge, preparation, and resources. At HFS FCU, we’re here to help our members reach this key life milestone by offering competitive rates and terms.

Can First-Time Buyers Really Afford a House in Hawaii?

Can you really afford a home in Hawaii? Absolutely!  HFS has partnered with hundreds of our members over the years to help them achieve homeownership. We offer first-time homebuyers competitive fixed-rate mortgages with terms up to 30 years, low closing costs, and no prepayment penalties. First-time homebuyers also benefit from personalized guidance of our dedicated loan officers who can walk you through every step of the home-buying process in Hawaii.

Understanding Hawaii’s Housing Market for First-Time Buyers

While Hawaii’s median home prices are significantly higher than the national average, prices vary significantly by island. For instance, the Big Island tends to have the most value for first-time buyers, and there’s also the option of purchasing a condo rather than a single-family home.  First-time buyers should plan with a realistic monthly payment target and verify that local taxes and association fees fit within their debt-to-income ratio.  Understanding these financial aspects leads directly to the next critical consideration for first-time buyers: the ownership structure.

Fee Simple vs. Leasehold: Critical Knowledge for First-Time Buyers

Fee Simple ownership means you buy both the house and the land.  Leasehold means you buy the building for a set period while someone else owns the land. 

If you plan to purchase a home on leased land, inform your lender.  Lease terms can affect your maximum loan amount, monthly mortgage payment, and eligibility for private insurance waivers, as well as the ease of qualifying for a loan.

Your First-Time Home Buying Journey in Hawaii: 8 Essential Steps

Step 1: Build Your First-Time Buyer Financial Foundation

Setting your budget is one of the most crucial steps in the home-buying process.

Consider all homeownership costs when deciding what you can afford monthly, including insurance, taxes, utilities, internet/cable, and necessary one-time expenses such as a down payment, closing costs, moving, and initial improvements.

Step 2: Check Your Credit and Improve Your Score

For institutions with pricing models, the higher your credit score, the better the interest rate you’ll qualify for. If your score is below average, focus on making timely payments and reducing debt to improve it quickly.  Review minimum-score guidelines for loans like FHA, so you know your target.

Step 3: Get Pre-Approved as a First-Time Buyer

A pre-approval involves filling out a mortgage application, having your credit checked by the lender, and receiving a pre-approval letter stating the amount you are approved to borrow. At HFS FCU, mortgage applications are available online, along with a list of required documents for the pre-approval process.

Step 4: Find a First-Time Buyer-Friendly Real Estate Agent

Your real estate agent plays a crucial role. Choose someone knowledgeable about your desired areas who will respect your budget and home needs.

Step 5: Determine Realistic First Home Priorities

Identifying your needs is crucial.  Consider factors such as:

• Proximity to work (daily commute)
• Proximity to school/school district
• Mountain or ocean views
• Paved roads
• Association Fees (HOA Fees)
• Zoning (i.e., lava zones)
• Utility hookup availability (electricity, internet, water)
• Number of bedrooms/bathrooms
• Lot size

Step 6: Navigate Your First Home Search in Hawaii

Navigating your home search requires patience.  Move quickly on desirable properties, but avoid making rash decisions. Understand listings, attend open houses, and negotiate prices with your real estate agent’s support.

Step 7: Make Your First Offer and Negotiate

When making an offer and negotiating, be aware of:

• Earnest money deposits, or “good faith” deposits, to show the seller you’re serious about purchasing the home.
• Negotiating closing costs.
• Asking for any necessary repairs prior to move-in.

It’s also important to be prepared to handle rejection, as you’re likely not the only one making an offer on the property.

Step 8: Complete Inspections and Close on Your First Home

A home inspection is crucial to ensure there are no surprises after purchase and to provide peace of mind. 

The loan experts at HFS Federal Credit Union can help you get started with purchasing your first home.

How First-Time Buyers Can Afford a House in Hawaii

Want to afford your first home in Hawaii?  Here are some considerations:

• Opt for a condo or townhome to build equity.
• Explore up-and-coming neighborhoods that are just waiting to be discovered.
• Instead of focusing on the hottest markets, explore islands and areas where you can find more value. 
• You might also offset your mortgage payments by renting out rooms or building an accessory dwelling unit (ADU).
• Think about purchasing with family members.  Living in a multi-generational household often makes homeownership more achievable. 
• Use IRA provisions and allocate retirement funds towards your first home when appropriate.

Where First-Time Buyers Should Look in Hawaii

First-time buyers should consider affordable areas with strong potential.  For instance, up-and-coming areas with planned developments can help buyers stay ahead of trends and offer good appreciation potential.

Common First-Time Buyer Mistakes to Avoid in Hawaii

As a first-time buyer, you must also avoid some common mistakes.  Here are a few examples:

• Do not start house hunting until you are pre-approved.
• Overlooking costs that are unique to Hawaii.
• Waiving inspections in competitive buying situations. 
• Failure to understand the distinction between fee simple and leasehold.
• Maxing out the budget without any emergency reserves.
• Not working with local lenders who understand the Hawaii real estate market.

First-Time Buyer Success Stories with HFS

From single adventurers to growing families, HFS FCU has guided hundreds towards their homeownership dream.  Ready to write your success story?   Contact us and let’s make it happen together.

Take Your First Step Toward Hawaii Homeownership

Excited to start your Hawaii home journey?  Apply online at https://hfsfcu.org/1st-mortgages/ or call (808) 930-1400 to schedule a no-pressure chat with a loan officer.

First-Time Home Buyer FAQs for Hawaii

How can I buy a house with no down payment in Hawaii?

Yes, various programs are available that require zero or little down payment.

What is the best program for a first-time home buyer?

The best program depends largely on your situation. Contact HFS FCU to explore all of your options.

What credit score is required for first-time buyers in Hawaii?

Different loan types require different credit scores.  Generally, FHA loans require a credit score of at least 500, and conventional loans require a credit score of at least 620.

How much should first-time buyers save for a down payment in Hawaii?

It depends on the loan type. Some loans require a down payment as low as 3%.

Can I use gift funds for my down payment in Hawaii?

Yes, but these are subject to the specific rules of your loan type and lender requirements. 

What’s the minimum income needed to buy a house in Hawaii?

The home’s value and your down payment determine your minimum required income.  Constant HFS FCU for details.

Should first-time buyers consider condos or houses in Hawaii?

Your situation determines where condos or houses make sense.  Condos usually cost less and help you build equity. 

How long does it take to buy your first home in Hawaii?

Expect the process to take up to 5 months as you prepare your finances, search for a home, and complete the closing process, though timelines vary.

What closing costs should first-time buyers expect in Hawaii?

Your lender and the terms of your offer determine your closing costs.  These usually range from 2 to 5% of the purchase price. 

Can first-time buyers compete with cash offers in Hawaii?

Yes.  You can best accomplish this by making a strong offer, securing a pre-approved mortgage, and providing a high earnest money deposit.

What happens if I can’t afford 20% down in Hawaii?

There are various other programs available for first-time home buyers that require either zero or minimal down payments.

How do I know if I’m ready to buy my first home in Hawaii?

If you earn a stable income, manage your debt, and save enough for a down payment, you’re likely ready to take on homeownership .

What’s the biggest mistake first-time buyers make in Hawaii?

The biggest mistake first-time home buyers make in Hawaii — or anywhere — is underestimating the total cost of homeownership.