Buying a house in Hawaii is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.
For example, homes in Hilo are hitting the market at $650,000 and selling within 41 days — 12 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.
However, homes typically stay on the market longer in Kapaa, so you'll be able to take your time and potentially find a better deal.
The more you know about the steps to buying a house and Hawaii's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.
No matter where you are in your home buying journey, Clever's concierge team can connect you with local real estate pros who will help you purchase your Hawaii dream home!
The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!
Step 1: Save for a down payment
Your down payment is the initial portion of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Hawaii want you to contribute 20% of the purchase price as a down payment. That would be $180,388 for a $901,942 home — the typical home value in Hawaii.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum Down Payment (%)
Down Payment ($)
Based on typical home values from Zillow (June 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on a $901,942 home, the typical home value in Hawaii (Zillow, June 2022) with a 5.62% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
Hawaii down payment assistance programs
Do you need help securing a down payment for a house?
First-time and low-income homebuyers may qualify for one of the several down payment assistance programs available in Hawaii. Although eligibility requirements vary by program, there are plenty of great resources available. Here are just a few options in Hawaii to research and apply for:
Down Payment Assistance Loan Program
The HHOC (Hawaii HomeOwnership Center) offers a Down Payment Assistance Loan Program to low-moderate income homebuyers afford a home. Eligible borrowers are able to buy a home with only a 3% down payment and without mortgage insurance. A low monthly payment is required.
Deferred Closing Cost Loan
The HHOC also offers a Deferred Closing Cost Loan for first-time homebuyers with a first mortgage from HHOC. Eligible borrowers may receive a 15-year deferred loan of up to $10,000 without any monthly payments or interest.
To qualify for the program, your annual household income must not exceed 120% of the average median income for your county. You will also be required to take first-time homebuyer education classes.
U.S. Department of Housing and Urban Development
You can find more of Hawaii's homebuyer programs here.
Step 2: Get pre-approved for a mortgage
A mortgage pre-approval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Hawaii will require pre-approval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and pre-approval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Hawaii home.
Get Pre-approved Today!
Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?
To get a pre-approved for a mortgage, you'll fill out a mortgage application and provide details about your financial situation. They'll look at the following information to determine your mortgage pre-approval amount:
Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.
Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.
While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.
Because of this, you might consider paying off some of your other debts before applying for a mortgage in Hawaii.
Mortgage lenders in Hawaii want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.
While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.
Step 3: Choose the right location
A house's neighborhood can be just as important as its layout and features. In general, you should consider the following factors when deciding which neighborhood is best for you:
What's your home buying budget?
Once you know your budget (a pre-approval letter will tell you the most you can expect to borrow), you can narrow your search to neighborhoods where homes are selling within your price range.
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years. You want to choose a neighborhood that's in your budget, but could also lead to a big return when you decide to sell.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Honolulu:
Home value appreciation in Honolulu
Once you have a list of neighborhoods with homes in your budget, you should evaluate how well each one meets your personal needs and preferences. To finalize your list of target areas, consider factors like:
- School districts
- Your daily commute
- Crime rates
- Restaurants and amenities
- Transportation options
Step 4: Find a great real estate agent in Hawaii
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent should be an expert on buying a home in Hawaii.
They'll help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Hawaii.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. you should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Ask each of them questions about your target neighborhoods, how they prefer to communicate, and their strategy for helping you find and close on your new home. You should feel comfortable with the agent's knowledge, experience, and process before committing to an agent.
Top Local Agents Hand-Picked for You!
Clever matches you with multiple agents in your area so you can interview, compare, and choose the best one to help you buy your next home.
Step 5: Start house hunting in Hawaii
Searching for homes in Hawaii is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Prioritize your needs vs. wants when buying a home in Hawaii
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Hawaii can have a big impact on your number of options. For example, in Hawaii, July has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Hawaii. Historically, there are 11.2%) fewer homes for sale than during Hawaii's peak season.
Housing inventory in Hawaii by season
New Listings per Month
Based on June 2022 data from Realtor.com
Step 6: Make an offer
Once you find a Hawaii house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Hawaii, homes stay on the market for 82 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Hawaii homes sell fastest in September, where the average property is only on the market for 75. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in December, you have a bit more time to search. Homes typically stay on the market 12 days longer than Hawaii's annual average.
Average time homes spend on market in Hawaii
Based on June 2022 data from Realtor.com
What should your offer include?
Your real estate agent can help you decide which of these common options you should include in your offer:
- Seller concessions: You'll have to pay for most of your closing costs out of pocket when you buy a home, but you may be able to ask the seller to cover some of those costs for you. This option may allow you to offer a higher purchase price and essentially include your closing costs in your mortgage.
- Repair credits: If the home is in need of repair, you could ask for credits instead of having the seller make and pay for the repairs. The seller avoids the hassle of waiting for contractors to complete the job, and you get to oversee the repairs in the future to make sure they meet your expectations.
- Inspection contingencies: Most purchase agreements have inspection contingencies that allow you to change your offer (or back out all together) if the inspection turns up major problems. If you have a high degree of certainty about the house's condition (like if the seller can show you a recent inspection report), you can forgo this contingency to give the seller a higher sense of confidence.
- Letter to the seller: Many sellers have a personal attachment to the home. They've lived there for years and want to know the next owner will take care of the property. Writing a letter to the seller can show them how you picture your life in the house and appeal to their sentimental side.
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
Home inspections in Hawaii
Having your Hawaii home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Hawaii requires sellers to disclose known issues of a property to potential buyers, but it's recommended to get additional tests done to ensure that the home is in good condition. Before you decide to close on a house, consider getting these inspections done first:
Pest inspection: Termite and pest inspections may be required by some lenders in order to secure a loan. However, it's wise to complete an inspection to make sure the home is safe and free from any unwelcome critters.
Indoor air quality inspection: Getting an indoor air quality test can help you and your family avoid potential respiratory problems when moving into a new home.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
Step 8: Close on your new home!
Once you finish your inspections and your lender approves your financing, you'll be ready for closing! Closing is the process of finalizing your mortgage and transferring ownership of the property.
On the closing date, you'll meet at the title company to review some important paperwork and settle your closing costs. You'll be asked to sign several pages to finalize the transfer of your Hawaii home, so make sure you fully understand each document before signing.
Some common forms will include:
- Your final loan application
- The deed
- The mortgage promissory note
After the paperwork is finished, you'll pay off your closing costs. The title company will simply ask for the total amount due, and then they'll distribute your funds to every service provider you owe.
Homebuyers can generally sort their closing costs into four different categories:
- Title and escrow charges: Fees owed to the title company for their services. Sometimes, buyers and sellers split this cost since the title company helps facilitate the closing.
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. These fees will usually make up the bulk of your closing costs.
- Prepaid costs: Ongoing costs of owning a home. Some lenders require new homeowners to pay expenses like property taxes and homeowners insurance up front.
- Other closing costs: Miscellaneous costs that vary depending on the buyer’s situation. Other closing costs frequently cover pest inspections, certifications, and real estate attorney fees.
Buyers in Hawaii typically pay 3-5% of the purchase price in closing costs. For a $901,900 home — the typical home value in Hawaii — that's between $27,057 and $45,095!
Frequently asked questions
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Hawaii neighborhoods
- Partner with the right real estate agent in Hawaii
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
No, but the Hawaii Housing Finance and Development Corporation currently offers a Mortgage Credit Certificate to low-income homebuyers. This certificate reduces the federal income tax a potential homebuyer would need to pay, which could help them qualify for a mortgage.
The program is open to those who meet household income limits for their county and haven't owned a primary residence in the past three years. Interested buyers will need to submit a $25 application fee and a $400 processing fee.