You have just found the house of your dreams in Hawaii. A place with beauty, culture, and adventures. Unfortunately, you don’t have enough funds to pay in full. Your best bet is securing an FHA loan in Hawaii. Looking for ways to secure that? Here at Regentology, we have a few tips for you.
1- What is An FHA Loan?
The government provides home mortgages through a federal housing administration known as FHA. These are issued through approved banks or agencies. FHA helps lower-to-middle-income families looking to secure homeownership.
i- How An FHA Loan in Hawaii Works
An FHA loan limit ranges from $477,250 to $845,250 for a single-family home in Hawaii. To secure an FHA loan, your first step is going to the bank. Even with low credit scores or less down payments, banks will provide you with a home loan. The reason for it is that FHA assumes the risk on their behalf. As a first-time homebuyer, an FHA loan is your affordable bet.
As of 2022, you need at least a credit score of 580. Based on this, you can borrow up to 96.5% of your home value through an FHA loan. This leaves you with a down payment of 3.5%. If your credit score is less than 580, you will need to make a down payment of 10%.
2- An FHA Loan in Hawaii Down Payment Assistance
Down payments can be in any form, such as personal savings, financial aid from family, or down payment grant assistance. Furthermore, there are two programs designed for down payment assistance in Hawaii. However, homebuyers must contact and arrange for these programs on their own. These include the Down Payment Assistance Program in Honolulu and the Home Ownership Program in Hawaii.
3- FHA Loans Vs Conventional Loans
Unlike conventional loans, FHA loans are government-backed loans for those having moderate to lower levels of income. It will also assist someone if they have lower credit scores. The down payment for a home mortgage is also less, ranging between 3.5% to 10%. On the contrary, conventional loans are not backed by the government. They are given by private institutes such as banks, credit unions, etc. As these are private, lenders assume the most risk. Hence, they require strong credit scores of at least 680. The down payment required for conventional loans is also between 3% to 40%.
4- Qualifying For an FHA Loan in Hawaii
Those who don’t meet the requirements for a conventional loan can opt for an FHA loan in Hawaii. They can also be assisted further with Hawaii’s first-time homebuyer programs.
i- Don’t Acquire More Than the Area’s FHA Loan Limit:
The amount of your mortgage cannot exceed the county’s HUD maximum. However, this does not rule out the possibility of purchasing a more expensive home. You could pick up the slack by putting down a higher deposit.
ii- Make a down payment of at least 3.5 per cent:
If your credit score is 580 or above, you may be capable of making the needed 3.5 per cent down payment. You’ll need to put down at least 10% if your credit score is between 500 and 579.
iii- Have a credit score of 500 or higher:
Depending on the lender, you might be able to get an FHA loan with a credit score in the low 500s.
iv- Have a DTI of 43 per cent or less?
Less than 43% is considered a healthy DTI ratio. Exceptions might be offered by some lenders.
v- Obtain a home appraisal of your property:
On the property you intend to buy, you must obtain an FHA house appraisal.
vi- Take Mortgage Insurance into Account
The annual mortgage insurance premium (MIP), which ranges from 0.45 percent to 1.05 percent of the loan amount, and the 1.75 percent upfront mortgage insurance premium (UFMIP), which is payable at closing and incorporated into your mortgage, are both required for FHA loans.
Find the Right Mortgage for You at Regentology
Our team of trusted specialists will walk you through the lending process so you can make the best selections. Our local mortgage partners at Regentology are dedicated to assisting you throughout the process. We’ll assist you in exploring all of your options by discussing your financing requirements and laying out a clear path for you to follow, from choosing the ideal property to obtaining the best loan possible.