Hawaii First-Time Home Buying Assistance Programs
By Kim Franke-Folstad
(Last Updated – 03/2024)
Owning a home in Hawaii is a dream shared by many islanders (and would-be islanders). But it can be a struggle for some to make that dream come true.
It’s no secret that buying a home in a place most people consider to be paradise can be expensive. And it’s been that way for decades. According to Redfin, the median sale price of a home in Hawaii was $735,300 in January 2024, up 8.1% year-over-year. Honolulu and Kailua are the areas with the fastest-growing sale price.
Coming up with enough money for a down payment and closing costs can be difficult in the best of times. But in Hawaii, where the cost of living in general is higher than on the mainland, inflation can make home buying especially challenging. You can start by looking in one of the more affordable places in Hawaii.
First-time homebuyers may also be able to get financial help through the state, programs affiliated with the state, and in some cities and counties. There also are longstanding federal programs that could improve a buyer’s chances of success.
Recommended: First-Time Homebuyer Guide
Who Is Considered a First-Time Homebuyer in Hawaii?
First, a point of clarity as you start your search for a home loan. For most programs offered in Hawaii, applicants are considered first-time homebuyers if they haven’t owned a home for the past three years. The definition jibes with that of the U.S. Department of Housing and Urban Development (HUD).
3 Hawaii Programs for First-Time Homebuyers
In Hawaii, first-time buyers can find programs that offer down payment assistance, help locating an affordable home, and a mortgage credit certificate that can reduce a homeowner’s income taxes.
These programs were established to assist low- to moderate-income buyers. There also may be a limit on how much the purchased home can cost. Here’s a look at what’s available statewide.
1. HHOC Mortgage Down Payment Assistance Loan Program
HHOC Mortgage, a nonprofit affiliate of the Hawaii HomeOwnership Center (HHOC), was created to help low- to moderate-income families obtain financing.
The lender’s DPAL Program offers qualifying first-time buyers a first mortgage with a 3% down payment paired with a deferred second mortgage of up to $125,000 for down payment or closing cost assistance (including rate buydown), subject to the availability of funds.
Qualifications include:
• Home must be a single-family dwelling, condominium, or townhouse
• HHOC mortgage must originate the first mortgage, and will do so at the same time the 15-year down payment assistance loan (second mortgage) is originated
• Conventional, USDA, VA, and FHA loans available
• Can’t exceed 120% of area median income
• Must complete in-class or online homebuyer education with a HUD-approved counseling agency
• Must complete one counseling session with Hawaii HomeOwnership Center
To determine your eligibility, you can contact an HHOC Mortgage loan officer at [email protected], or by calling 808-523-9500 (Oahu), or 877-523-9503 (toll-free). If you qualify, DPAL funds will be reserved once you’ve entered into a purchase contract.
Recommended: Understanding the Different Types of Mortgage Loans
2. HHFDC Affordable Resale Program
The Hawaii Housing Finance and Development Corp. is a government agency that provides affordable housing opportunities to residents of Hawaii. Its Affordable Resale Program offers previously owned condos repurchased by the agency for sale to qualified residents through a public drawing or lottery process.
Qualifications Include:
• Must be a first-time homebuyer who does not own any unit anywhere in the world
• Must be a U.S. citizen or permanent resident alien and a Hawaii resident
• Must reside in the unit through the time of ownership
• Must meet area median income requirements
• Must agree to the agency’s 10-year buyback and shared profit clauses
The HHFDC offers virtual information sessions for interested homebuyers. You can sign up at Hawaii Housing Finance & Development Corporation Affordable Resale Program or get more information on the program at the site. You can call the HHDC at 808-587-0620. To apply, fill out an intake form and email it to [email protected].
3. HHFDC Mortgage Credit Certificate Program
The mortgage credit certificate program offered by the HHFDC is a different kind of statewide assistance program designed to help low-income homebuyers. Borrowers can use the certificate to claim a portion of their annual mortgage interest, dollar for dollar, up to $2,000, as a federal tax credit every year for the life of their loan.
The tax credit is available to homebuyers who meet specific household income and home purchase price limits.
Check out the program brochure to find out more about the benefits and requirements
You can apply for the credit certificate when you take out a home loan through a participating lender . There may be a fee to participate.
Other Homebuyer Programs by Location
If you’ve already chosen the island or county you hope to make your home in Hawaii, you also may want to research the local buyer assistance programs available there.
If you can’t find assistance in your chosen location, check back occasionally for new offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.
Programs that are currently available include:
Kaua’i County Housing Agency Home Buyer Loan Program
The Kaua’i County Housing Agency Home Buyer Loan Program provides low-cost primary and gap mortgages to income-qualified first-time homebuyers on the island of Kaua’i. For information on benefits and requirements, you can check out the program brochure or call 808-241-4444.
City and County of Honolulu Down Payment Loan Program
The City and County of Honolulu’s Department of Community Services administers a down payment assistance program using HOME Investment Partnership Act funds from HUD. The program provides income-qualifying families with a 0% interest second loan to help with their down payment.
A FAQ page offers information on the program’s benefits, requirements, and how to apply. Or call the Department of Community Services at 808-768-7762.
How to Apply to Hawaii Programs for First-Time Homebuyers
The way to get more information about each program, and apply, is described above. Often an approved lender is the go-to for assistance programs. Before you take steps to apply, make sure you have a copy of your most recent tax return at hand because you’ll be asked about your household income.
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Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.
In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.
Gift money for the down payment is allowed from certain donors. A gift letter for the mortgage will be needed to document the source of the funds.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.
Freddie Mac Home Possible Mortgages
Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .
Fannie Mae Standard 97 LTV Loan
The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.
Department of Veterans Affairs (VA) Loans
Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.
Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.
Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.
Native American Veteran Direct Loans (NADLs)
Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.
US Department of Agriculture (USDA) Loans
No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .
HUD Good Neighbor Next Door Program
This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.
First-Time Homebuyer Stats for 2024
Here are some stats on homebuyers and the homebuying process.
• Percentage of buyers nationwide who are first-time buyers: 32%
• Median age of first-time homebuyers nationally: 35
• Median home price in Hawaii: $735,300
• Median gross rent in Hawaii: $1,868
• 61.8% of Hawaii housing units were owner-occupied
• Average credit score in Hawaii: 732
Additional Financing Tips for First-Time Homebuyers
In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:
• Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
• Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
• 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
• State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
• The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
• Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
• Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
The Takeaway
Being a first-time homebuyer in Hawaii can be especially challenging, but if you can qualify for one of the mortgage and assistance programs, you may be able to reduce costs. Other first-time buyers can look for advantages among the world of mortgages on their own.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Should I take first-time homebuyer classes?
Yes! Good information is key to a successful purchase process for anyone, but especially for newcomers, who can easily be overwhelmed by purchasing a home. First-time homebuyer classes can help. Indeed they are required for many government-sponsored loan programs.
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.
Is there a first-time homebuyer tax credit in Hawaii?
Yes. The Hawaii Housing Finance & Development Corp. administers a mortgage credit certificate program that allows qualifying borrowers to claim a portion of their annual mortgage interest paid as a federal credit of up to $2,000 every year for the life of their loan.
Is there a first-time veteran homebuyer assistance program in Hawaii?
HHOC Mortgage offers a special VA loan, paired with a deferred second mortgage if needed, for veterans who meet income guidelines. VA-backed home loans are available nationwide to eligible service members, veterans, and surviving spouses.
What credit score do I need for first-time homebuyer assistance in Hawaii?
Credit score minimums may vary from one program to the next, and some programs use criteria other than credit scores to determine a borrower’s eligibility. You can check with the organization or lender offering first-time homebuyer assistance to get specific financial requirements.
What is the average age of first-time homebuyers?
The median age of first-time buyers is 35.
Photo credit: iStock/JamesBrey
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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