Buying Advice

You May Be Able to Buy a House in Hawaii with 100% Financing…but How Do You Compete?

What a great benefit to be able to buy a home with no, zero, nada down payment! Not everyone can take advantage of this, but if you fall into one of two categories, you’re likely a candidate for 100% financing on Oahu.

There are 2 loan programs that contain this benefit: a VA Loan and a USDA Loan.

Let’s talk about the VA loan first. The VA loan is guaranteed by the United States Department of Veterans Affairs. You will likely qualify if you’ve been in the Military and served at least:

  • 90 consecutive days of active service during wartime
  • 181 days of active duty service during peacetime
  • 6 years in the Reserves or National Guard
  • Or you are the spouse of a service member who has died in the line of duty or as a result of a service-related disability

A USDA loan is insured by the United States Department of Agriculture and is often used when buying in more “rural” neighborhoods, although rural is a relative term these days. On Oahu, the geographical areas which would be eligible for a USDA loan is:

  • West of Kunia through all of Waianae
  • Certain central parts of the island such as Waipio, Waikele, and Whitmore Village
  • All of the North Shore
  • Up to the Ahuimanu area of Kane’ohe on the Windward side of the island

If you’re not very familiar with these areas of Oahu, it’s easiest to ask your real estate representative or a lender who does USDA loans, especially because the boundaries are not clearly defined. Keep in mind there are income qualifications for USDA, depending on your household size.

So if you are lucky enough to be doing 100% financing, you need to be prepared to compete with other buyers. Within the real estate industry, buyers with the highest down payments are often seen as “stronger” and more desirable. These buyers have skin in the game and if they default, the seller can attempt to retain their deposits. In reality though, a VA or USDA buyer is just as good, as long as they are solid financially. In order to make your offer stand out amongst the competition, here are some tips to start with:

  • Make your offer as “clean” as possible. Don’t ask for a lot of extra contingencies.
  • Offer to pay for any of the typical seller costs such as the condo or association docs, the survey, or cleaning.
  • Better yet, delete anything that is not super necessary for you, ie. cleaning, professional carpet shampooing, flea/tick carpet treatment, surveys in certain subdivisions where the fences were put in by the developer and no changes have been made.
  • Even if you can do 0% down, put a higher deposit down. You can still get those funds back at closing.
  • If you’re doing a VA loan, don’t ask the seller to pay for your VA non-allowables. A lender who specializes in VA loans will likely pick up those costs for you to make your offer look stronger.

Of course, you will want to consult with your real estate professional and get advice from them since every house and every buyer is a different situation. Contact me for more information on the VA or USDA loan programs. Good luck and happy house hunting!

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