Assistant Vice President/ Loan Manager
Honolulu HomeLoans, Inc. NMLS #349769
With today’s extremely low mortgage interest rates, home ownership is within reasonable reach for many individuals and families. In addition to low interest rates, home buyers are also able to take advantage of low down payment programs such as Hula Mae, FHA, and Conventional loans. Eligible buyers may even be able to purchase without placing a down payment using VA or USDA programs.
With the State of Hawaii Hula Mae program, a qualified home buyer can purchase with low or even no down payment on a 30 year fixed rate loan. Some buyers may choose to use the Down Payment Assistance program, enabling them to receive up to 3% of their purchase price for a down payment. This 3% received from the Down Payment Assistance Program is not a loan and does not need to be repaid. Honolulu Home Loans is one of the few lenders participating in Hula Mae with Down Payment Assistance. Mortgage insurance is required but the monthly premiums are reduced for conventional loans compared to FHA loans.
FHA loans are sponsored by the federal government and allow buyers to put as little as 3.5% down. FHA rates are also very attractive hovering around 3.5% for a 30 year fixed rate. Mortgage Insurance is required and tends to be pricier than for conventional loans.
Conventional loans are sponsored by Fannie Mae and Freddie Mac. The minimum down payment requirement for Conventional loans is 3%. Conventional interest rates are in the range of 3.5% for a 30 year fixed rate mortgage. Mortgage insurance is required but there are more options for mortgage insurance premiums than with FHA loans. If buyers are able to place a 5% down payment, mortgage insurance can be financed into the loan amount making the monthly mortgage payment more affordable.
Buyers who are eligible for veterans’ benefits can take advantage of the VA loan program which allows them to finance up to 100% of the purchase price, thereby eliminating the down payment requirement. VA interest rates are similar to FHA rates, hovering around 3.5% for a 30 year fixed rate. Mortgage insurance is not required for VA loans, but VA loans do require a funding fee which is financed in the amount borrowed; this fee does not need to be paid at closing. The funding fee can be as much as 2.15% of the purchase price for first-time users of VA loan benefits.
USDA loans are another federally sponsored program that allows buyers to finance 100% of the purchase price. The financed property, however, has to be located in a designated rural area in order to qualify for a USDA loan. Mortgage insurance is not required but USDA does charge an upfront Guarantee Fee which is 2% of the loan amount. USDA loans have an annual Guarantee Fee of .3% of the remaining loan balance which is collected on a monthly basis through the regular loan payments.
Some of these loan programs have occupancy and income limit restrictions, and therefore have their “pros and cons.” It’s best to consult a registered loan professional who can find the program that best fits your financing needs. Please contact a Honolulu Home Loans officer today for a no-obligation consultation.