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Home Loans Get Cheaper, More People Can Qualify

homes012115-1The new year has brought an amazing opportunity for people who dream of owning a home, but haven’t been able to in the past.

Last week, interest rates dropped to 3.8 percent — the lowest rate in almost two years and almost the lowest rate in history. In the past 40 years, interest rates have ranged from 5 and 11 percent, except for the 1980s when they rose to almost 19 percent.

Low interest rates help many people qualify for a home loan who may not be able to at higher rates. They also make monthly mortgage payments cheaper. Dropping just one point, from 5 percent to 4 percent, on a standard, fixed-rate 30-year loan of $325,000, saves the homeowner $200 a month.

As home prices in Hawaii continue to rise, these low interest rates are an opportunity for many people to get into the real estate market and own a home before they get priced out.

If you’re ready to take advantage of this rare opportunity in mortgage rates, there are four simple steps that will lead you to success:

Step 1: Build an Expert Team. Buying a home may be the biggest investment you ever make, so it pays to call in the experts. You’ll need a REALTOR® and a loan officer. Find people with a proven track record that you feel comfortable with and can trust to have your best interests in mind. Ask friends and family for referrals.

Your REALTOR will help you find homes that meet your budget and desires. She will negotiate on your behalf and represent your interests during the purchase transaction. Her commission is generally paid for by the seller, not you as the buyer.

It helps to have a REALTOR who is an expert in the neighborhood or type of property that you want. Knowing the neighborhood’s properties, price trends and sellers will help your REALTOR craft a winning offer and negotiate the best deal.

Locations LLC offers free, no-obligation “Future Homebuyer” seminars that explain the nuts and bolts of the home buying process. Call 377-4899 for more information.

Step 2: Get Preapproved.

Your loan officer will get you pre-approved. Having a confirmed budget and a preapproved loan before you begin looking for homes sets you up for success and saves you a lot of time. If you start looking at homes that cost $500,000 when the loan that you will qualify for puts you in a townhome of $350,000, you waste time and set yourself up for disappointment.

The preapproval process will tell you how much you are qualified to borrow and what you can really afford. It saves you time and effort, and when you find your perfect first home, it puts you in the position to make a solid, competitive offer. Sellers today won’t consider buyers who aren’t pre-approved.

For preapproval, your loan officer evaluates your income, monthly expenses, and debt to determine the monthly mortgage payment that you can afford. He runs your credit report, and if there are issues with it, should help you address them. You don’t have to have perfect credit to qualify for a loan.

Your loan officer will also advise you on any special loan programs for which you might qualify, such as VA loans for military and the Mortgage Credit Certificate.

Prepare for your first meeting with the loan officer by gathering your paperwork: 30 days of pay stubs, two years of tax returns, two months of bank, investment and credit card statements.

Step 3: Estimate Your Closing Costs.

You pay these one-time fees to legally transfer the ownership of the home from the seller to you. These fees typically cover appraisers, inspectors and any fees charged by your lender to set up the mortgage. They also include escrow fees, which in Hawaii include homeowner’s insurance and property taxes. It’s important to get a good estimate of your closing costs, so that you can budget for them alongside your down payment.

Step 4: Find Your Home!

With a budget and preapproved loan in hand, you can start house-hunting. Search online at, which has the most comprehensive real estate search for Hawaii, including new projects, foreclosures and for sale by owner properties. The “power search” feature lets you customize your search by price range, neighborhood of interest, number of bedrooms, yard or pools, and more. You can also sign up for daily or hourly alerts for homes that meet your criteria.

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