Financing Options
CONVENTIONAL
Normally this type of loan requires 20% down payment without Private Mortgage Insurance (PMI) to protect the lender. However, it can be obtained as low as 5% down payment. Most lenders will require a PMI, but there are Hawaii lenders that may waive this requirement. Common terms for a conventional loan are 15 or 30 years to pay. The interest rate is usually fixed which means it will stay the same for the life of the loan. Verify with the lender that your interest rate is fixed and that there are no pre-payment fees just in case you decide to refinance for a lower interest rate.
The lower the interest rate, the better. In some cases, you may be able to buy down the interest rate. Check with your lender.
To prevent PMI, it may be necessary to acquire a second mortgage for loans beyond the 80% of the home value (i.e. 80% first mortgage, 15% second mortgage, 5% down payment).
ADJUSTABLE RATE MORTGAGE (ARM)
This type of loan has a low interest rate that typically increases over time. It often offers a fixed interest rate for a certain period of time which becomes variable (changes with current market rates). The terms of the loan varies for each lender. Some ARM loans require you to pay the remaining balance of the loan. This loan term is called a balloon.
This loan is available to qualified veterans of the U.S. Armed Forces and it has flexible underwriting guidelines. The interest rate is sometimes a little bit higher than conventional loans, but it doesn't require any down payment. Buyers are charged a financing fee which is approximately 3%. This amount often can be added to the loan. It may also be waived for veterans with at least 10% service-connected disability. The current VA home loan limit for the Honolulu County (Oahu Island) is $726,525. If you're trying to purchase a home higher than this, no worries. There are ways to calculate VA home loans so that you don't have to put much down payment. The home being purchased must be the buyers' primary home. For more information, please click on the underlined links.
FEDERAL HOUSING ADMINISTRATION (FHA)
FHA insures home loans, made by FHA-approved lenders. Down payment may be as low as 3%. For more information, please click on the underlined links.
NON-CONFORMING LOANS
This type of loan does not conform to the normal FHA/VA and conventional lending guidelines. Examples of these situations include prior bankruptcies and excessive credit problems.
RENOVATION FINANCING
This type of loan allows buyers to use the loan to renovate or remodel a home. It can be combined with FHA or conventional loans.
OWNER ASSISTED
Owners (sellers) may finance the buyers' loan.