Hawaii First-Time Home Buying Assistance Programs for 2022

Hawaii First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 07/2022)

    Owning a home in Hawaii is a dream shared by many islanders (and people around the world who hope to be islanders someday). 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. But in a hot seller’s market, with low inventory and rising prices, it can be tough for first-time homebuyers in Hawaii to catch a break.

    According to Redfin, the median sale price of a home in Hawaii went from $646,400 in April 2021 to $753,000 in April 2022. That’s a 16.7% increase in just 12 months.

    In some communities, the numbers were even higher. In Kaanapali, where home prices were up 28.6% year-over-year, the median purchase price in April 2022 was $1.5 million. In East Honolulu, where the median sale price also rose to $1.5 million, home prices were up 59.4% compared to last year.

    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 typically higher than on the mainland, inflation can make home buying especially challenging.

    First-time homebuyers may 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: The SoFi Guide to First-Time Home Buying

    Who Is Considered a First-Time Homebuyer in Hawaii?

    First, a point of clarity. 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 $100,000 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

    TThe 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.

    Recommended: Understanding Mortgage Basics

    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 program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    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. You can learn more about FHA loans in general and FHA mortgage limits by area by area.

    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, 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 , 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.

    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.

    U.S. 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 2022

    Ever wonder where you fit amid the mix of buyers who are out there shopping for their first home? Here are some stats from a recent National Association of Realtors® Profile of Home Buyers and Sellers:

    •  Percentage of buyers nationwide who are first-time buyers: 34%

    •  Median household income of first-time buyers nationwide: $86,500

    Type of home purchased by first-time buyers:

    •  Detached single-family home: 80%

    •  Townhouse/rowhouse: 9%

    •  Condo/apartment (five or more units): 1%

    •  Duplex/condo/apartment (two to four units): 2%

    •  Other: 8%

    Median home price of first-time homebuyers: $252,000

    Median down payment of first-time homebuyers: 7%

    Median age of first-time homebuyers: 33

    Relationship status of first-time homebuyers:

    •  Married: 50%

    •  Single females: 20%

    •  Unmarried couples: 17%

    •  Single males: 11%

    First-time homebuyers with kids nationwide:

    •  No children: 70%

    •  One child: 15%

    •  Two children: 11%

    •  Three or more children: 5%

    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.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and 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 33, according to the National Association of Realtors.


    Photo credit: iStock/JamesBrey
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