8 Steps to Buying a House in Hawaii

Thomas O'Shaughnessy

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Thomas O'Shaughnessy

September 16th, 2022
Updated September 16th, 2022

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8 Steps to Buying a House in Hawaii

Save for down payment | Find a real estate agent | Get preapproved for a mortgage | Choose your neighborhood | Go house hunting | Make an offer | Inspections and appraisal | Final walkthrough and closing

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 $666,250 and selling within 52 days — 12 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.

The more you know about the home buying process 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 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!

» START: Buy with a top local agent, save thousands with Clever Cash Back

Step 1: Save for a down payment

🔑 Key takeaway:

Your down payment can be less than 20% of the purchase price — $183,615 for the typical home in Hawaii — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.

Your down payment is the first part 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 $183,615 for a $918,075 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).

Mortgage type
Minimum down payment (%)
Down payment ($)
VA Loan
0%
$0
FHA Loan
3.5%
$32,133
Conventional
3%
$27,542
Based on typical home values from Zillow (August 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.

Down payment
Monthly payment
Total interest
Total Cost
5%
$4,887
$887,015
$1,805,090
20%
$4,115
$746,960
$1,665,035
Based on home values from Zillow (August 2022) and a 5.38% 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.

» READ MORE: Everything you need to know about low-income home loans

Hawaii down payment assistance programs

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: Find a great real estate agent in Hawaii

🔑 Key takeaway:

Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.

Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will 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

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 3: Get preapproved for a mortgage

🔑 Key takeaway:

Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.

Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:

  • Avoid opening new credit accounts
  • Don't close any accounts that have been open for a long time
  • Make all of your credit card payments on time

» LEARN MORE: What factors do mortgage lenders consider?

A mortgage preapproval 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 preapproval before showing you their home.

You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval 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?

Step 4: Choose the right location

🔑 Key takeaway:

Search for neighborhoods where:

  • Home prices are within your price range
  • Home values are on the rise
  • The local amenities support your lifestyle

Currently, the typical home value in Hawaii is $918,075, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!

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.

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

Neighborhood
2015
Current
Appreciation
McCully-Moiliili
$422,125
#N/A
#N/A
Manoa
$1,189,745
$1,762,503
32.5%
Waikiki
$387,190
$508,258
23.8%

Step 5: Start house hunting in Hawaii

🔑 Key takeaway:

Listing prices in Hawaii have increased over the last year while inventory continues to dip. There won’t be a lot of options available and little wiggle room regarding the price. If you’re determined to buy, keep an open mind to your real estate agent’s suggestions. While it may be difficult to find the perfect home, you may be surprised with the listings your agent can find.

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.

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, February 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 15.9% fewer homes for sale than during Hawaii's peak season.

Housing inventory in Hawaii by season

Season
New listings per month
Spring
1,705
Summer
1,699
Fall
1,669
Winter
1,648
Based on data from Realtor.com (August 2022)

Step 6: Make an offer

🔑 Key takeaway:

Houses in Hawaii may sit a bit long in the market, but the limited inventory in the state is leaving very few available at the end of each month. This means that you have some time to mull over the offer you plan to write, but don’t put it off for too long. Consult with your realtor to come up with a fair and competitive figure that will still be a good deal for you.

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 days. 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

Annual average
82 days
January
85 days
February
81 days
March
76 days
April
74 days
May
74 days
June
73 days
July
75 days
August
76 days
September
80 days
October
80 days
November
82 days
December
83 days
Based on data from Realtor.com (August 2022)

» LEARN MORE: What should an offer include?

👋 Next Steps: Talk to an expert!

If you're weighing your options for buying or selling a house, Clever can help!

Our fully-licensed concierge team is standing by to answer questions and provide free, objective advice on getting the best outcome with your sale or purchase.

Ready to get started?

Give us a call at 1-833-2-CLEVER or enter your info below. Our concierge team will be in touch shortly to help.

Remember, this service is 100% free and there’s never any obligation.

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.

🔑 Key takeaway:

  • Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
  • Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.

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:

  • Roof
  • Foundation
  • Electrical system
  • HVAC system
  • Plumbing

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-specific inspections

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

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.

» LEARN: 3 options for buyers after a low appraisal

Step 8: Close on your new home!

🔑 Key takeaway:

Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.

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 $918,100 home — the typical home value in Hawaii — that's between $27,543 and $45,905!

» LEARN MORE: Closing costs for buyers in Hawaii

Should you hire a real estate attorney?

In Hawaii it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.

Frequently asked questions

  1. Save for down payment
  2. Get pre-approved for a mortgage
  3. Choose your preferred Hawaii neighborhoods
  4. Partner with the right real estate agent in Hawaii
  5. Go house hunting
  6. Make a strong offer
  7. Inspections and appraisals
  8. 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.

» READ: What are the top first-time homebuyer programs?

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