Buying your first home can seem like a daunting task, especially in Hawaii’s housing market. The best way to get started is to make sure you are prepared before even looking at houses. This article will help you do just that.
1 – Decide what you need
Purchasing a home is a long-term commitment, so you’ll want to make sure that your new home meets your needs. For many, common factors to consider include:
- 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
2 – Set a budget
Setting your budget is one of the most important parts of the home buying process. Be sure to consider all the costs that you have as a homeowner when deciding what you can afford each month. For example, homeowner’s insurance, hurricane insurance, property taxes, electricity, water, internet/cable, etc. If you are able to make a down payment of 20% of the purchase price, you’ll also avoid having to pay Private Mortgage Insurance (PMI), which is what lenders can add on to the loan if they are financing more than 80% of the home’s value.
The best way to start your budget is to start with your monthly payment. Figure out your ideal monthly payment based on your budget and work backwards to find a range of home prices that would put you in that payment range. Be sure to include your down payment in your calculations. HFS offers this handy budget template to help you get started if you don’t already have a set monthly budget.
3 – Get pre-qualified
A very important step to take before you start house hunting is to get pre-qualified. In this process, you meet with a lender to review your finances and they give you an estimate of the maximum amount they would lend you to purchase a home. Many times, realtors will ask if you’ve already been pre-qualified when showing you a home. It can help speed up the process when you know what you can afford and it lets the realtor know you’re serious about home-buying. It is important to note that there is a difference between getting pre-qualified and pre-approved.
A pre-approval involves filling out a mortgage application, having your credit pulled by the lender, and being given a pre-approval letter stating the amount you are already approved to borrow. At HFS Federal Credit Union, mortgage applications can be found online, along with a list of documents necessary to complete the pre-approval process.
4 – Find the best real estate agent for your needs
Your real estate agent is an important factor in the home buying process. Whomever you choose to represent you should have your best interest at heart to help you accomplish your home buying goals. Many times, reaching out to family and friends for a referral is a great place to start. Look for someone who is knowledgeable about the areas where you are planning to buy a home and someone who will respect your budget and home needs.
5 – Leasehold vs. Fee Simple Ownership
Fee Simple ownership refers to the purchase of a house and land in entirety. Leasehold ownership is exactly what it sounds like. When you purchase you are essentially leasing the building for a specified amount of time, but the ownership of the land belongs to someone else. At the end of the lease the “ownership” of the building returns to the landowner. If you plan to purchase a home on leased land, it is important to inform your lender to ensure their loan covers this type of property.
6 – Get your home inspected
A home inspection is a very important piece of the buying process. There are a variety of things that can “go wrong” when buying a home without an inspection. The home inspection helps provide some peace of mind that there shouldn’t be any surprise issues popping up after you buy the home that could cost you money that wasn’t planned for. It allows you to know exactly what you are getting into when you buy the home, especially when it comes to the important things like the home’s foundation, electrical, plumbing, termites, etc.
Frequently Asked Questions
What are the qualifications for first time home buyers?
First time home buyer programs often have different qualifications, but some of those qualifications will or could include:
- Never purchased a home before
- Proof of steady employment (will need to provide pay stubs or other required documentation) with an income that doesn’t exceed a specified amount
- Purchase of a home within a specific geographic area or zome
- A member of a certain group of people, such as a Veteran, who could qualify for a Veterans Affairs (VA) loan
How can I buy a house with no down payment in Hawaii?
There are first time home buyer programs that offer 100% financing, $0 down payment, such as the USDA program. It is a good idea to research the different programs available and see which you qualify for before starting your home search.
What is the best program for a first time home buyer?
The best program for a first-time home buyer truly depends on the buyer. The programs that exist all vary in the qualifications needed to utilize the program. Once you find out which programs you qualify for, be sure to research all the requirements and find the program that best fits your needs.
Apply for a Home Loan with HFS Federal Credit Union
The loan experts at HFS Federal Credit Union can help you get started with purchasing your first home. Apply online at https://hfsfcu.org/1st-mortgages/ or call (808) 930-1400 to schedule an appointment with a loan officer.