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Living in an island paradise comes with a steep price tag. As of December 2022, the median list price of a home in Hawaii was a whopping $696,100, according to real estate brokerage Redfin. Those housing costs, coupled with expensive groceries and utilities, can add up to a less-than-sunny reality for prospective homeowners in The Aloha State.
The good news is, there are some options that can ease the financial burden of finding a place to call your own in Hawaii. If you’re a first-time homebuyer, consider starting with the Hawaii Housing Finance & Development Corporation, the state’s housing and development agency.
Hawaii first-time homebuyer loan programs
HHFDC Affordable Resale Program
The Hawaii Housing Finance & Development Corporation (HHFDC) does not currently offer a low-interest rate mortgage program specifically for first-time homebuyers, but there is at least one other option to consider: the agency’s Affordable Resale Program, which could help you find an affordable home — as low as $325,000 for a one-bedroom.
To qualify for this program, you’ll need to earn enough income to be able to afford the loan for the home, but not so much that it exceeds the HHFDC’s annual household income limit. You can use the HHFDC’s income eligibility worksheet to determine if your financial situation fits these guidelines.
Eligibility doesn’t guarantee access, though. The program is a lottery system, so you’ll need some luck on your side, too.
There are also two restrictions with this program you should be aware of:
- Buyback limitation – You’ll need to live in the home for at least the next 10 years. If you don’t, the HHFDC has the first right of refusal to buy it back.
- Shared profit – If the home has increased in value, you’ll be in line to earn a return from your initial investment when you decide to sell. Here’s the catch: You’re going to need to pay a portion of that appreciation to the HHFDC. The percentage you’ll pay varies based on a few factors. Let’s say you purchased the home at $300,000, but it’s now worth $400,000. You won’t pocket all of that $100,000 difference. A portion of it — perhaps as much as 30 percent — will go to the HHFDC.
Hawaii down payment assistance
While the HHFDC isn’t currently offering programs targeting first-time homebuyers, there are additional ways to make buying a home more affordable, particularly when it comes to making a down payment and covering closing costs.
In Maui, for example, the Department of Housing and Human Concerns Housing Division has a down payment assistance program that can help you receive up to $30,000 or 5 percent of the home’s purchase price (whichever is less), to be repaid only when you sell your home or do a cash-out refinance. Your eligibility hinges on a few requirements:
- Be a Maui resident when you apply
- Have a household income that is 140 percent or less of the area median income
- Have no more than $75,000 in liquid assets (e.g., cash, stocks, bonds, CDs and securities)
If you’re approved for the assistance, you must complete a homebuyer education course as part of the program’s requirements.
The Hawaii HomeOwnership Center can also be an option. This organization offers assistance to homebuyers throughout the entire state. This includes:
- Down Payment Assistance Loan (DPAL) – This second-mortgage assistance program, for up to $100,000, is paired with a 3-percent down first mortgage.
- Deferred Closing Cost Loan – This program is a 15-year deferred matching loan. For example, if you can contribute $2,500 to your closing costs, you might be able to score $10,000 in assistance. The loan will not accrue interest or require monthly payments, but it will be due in full at the end of the term.
Other Hawaii homebuyer assistance programs
Mortgage credit certificate (MCC)
If you’re a first-time homebuyer in Hawaii, you can obtain a mortgage credit certificate (MCC) that allows you to take 20 percent of your mortgage interest as a dollar-for-dollar tax credit, which can add up to significant savings over the course of a 30-year mortgage. You can qualify for the MCC program if you meet the following conditions:
- You have not owned a home in the last three years.
- Your income does not exceed a certain limit, which varies based on household size and county ($107,200 to $163,782).
- The property you’re purchasing does not exceed a certain limit ($396,527 to $702,283 depending on location).
To get the MCC, you’ll need to get in touch with one of the participating lenders in the program, and pay $425 in fees.
Other first-time homebuyer loan programs
Be sure to take advantage of Bankrate’s guide to first-time homebuyer loans and programs to see if you qualify for other nationally-available options, such as FHA, VA or USDA loans, which have either a low or no down payment requirement and potentially lower interest rates.
Ready to embark on the homebuying process? Start by comparing mortgage rates in Hawaii to get a sense of what different mortgage lenders can offer for your 30-year term. Be sure to dig deeper into the terms, though, to get a full understanding of what you’ll pay with each bank or credit union. Some might offer savings on mortgage points, reduced closing costs or extra incentives if you complete a homebuyer education course, for instance.
Shopping around is essential: With the high cost of living in Hawaii, every dollar you can save counts.