How to Buy a Home in Hawaii Without a 20% Down

One of the first things you’ll hear when you start considering homeownership is that you’ll need a hefty chunk of change upfront. So what are your options and how to buy a home in Hawaii without the 20% down option. Financial planners recommend putting down a 20% down payment for your best return and rates.  Here on the Big Island along the Kona and Kohala Coast the average median price for a residential home is hovering around $950,000. Consider your options! Review some of the latest Market Reports.

If you don’t happen to have that kind of cash on hand, you’re not alone! Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:

-VA loans:

If you or your spouse has served in the military, Uncle Sam has your back! You may quality for a Veterans Affairs loan, which requires 0% down and, unlike FHA loans, no mortgage insurance, since the Department of Veterans Affairs insures the loan on your behalf. The VA loan limit in 2022 is NO LIMIT for VA borrowers with full entitlement, but there is a VA loan limit for borrowers with an outstanding VA loan or prior VA loan default. That limit is calculated using the Conforming Loan Limit in 2022 of $970,800 for Hawaii! To get a VA loan, you’ll need to present a certificate of eligibility, proving one of the following requirements: 90 consecutive days of active duty during wartime, or 181 days during peacetime. Six years in the National Guard member or reserves. You were wounded in service, even if you served for less than the specified time.You’re a widow or widowers of a member of the military forces who died in action or from injuries suffered while on duty. Check out the VA qualified list of condos in Hawaii here.

-Bridge Loans:

Bridge loans provide short-term cash flow. For example, a homeowner can use a bridge loan to purchase a new home before selling their existing one.the application and underwriting process for bridge loans is generally faster than for traditional loans. Plus, if you can qualify for a mortgage to purchase a new home, you can probably qualify for a bridge loan—assuming you have the required equity in your first home. This makes bridge loans a popular option for homeowners who want quick access to funds to purchase a new house before they have sold their current property.

-Personal Portfolio Loans:

Speak to your financial planner on how you may be able to borrow against your portfolio’s asset valuation on a credit line secured by your portfolio’s value. This is a great option to obtain cash quickly yet the borrower has the means to pay back these loans fairly quickly and at a much lower interest rate then a traditional conventional scenario.

-Federal Housing Administration loans:

The Federal Housing Administration requires a down payment of only 3.5%. Compared to 20%, that’s pretty sweet-but these government-backed mortgages aren’t for everyone. To be eligible, you’ll need a decent credit score, of at least 580. Scores as low as 500 may qualify, but then you’ll need to put 10% down. Another stipulation is that you’ll have to pay mortgage insurance, an extra fee that’s required on home loans where less than 20% has been put down. There are also limits on how much money you can borrow, with a minimum and maximum between 65% and 115% of the median home price in an area-on average between $271,050 and $625,000. Still, in spite of these restrictions, these loans are plentiful and a boon to home buyers, particularly those who are entering the housing market for the first time.

-USDA rural development loans:

The United States Department of Agriculture also offers 0% money-down loans to home buyers who qualify as having low or moderate income. And the threshold for “moderate” can be quite high depending on where you live; in San Francisco, it amounts to $141,000for an individual. And while eligible properties are typically in rural regions where space isn’t at a premium, this doesn’t necessarily relegate you to the sticks. A full 97% of the United States is covered under USDA loans; check whether any address or area is covered at USDA.gov. State and local home buyer programs. The federal government isn’t the only one offering down payment assistance. In fact, there are 2,290 down payment programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study. Generally, these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website, or at the Down Payment Resource, which offers a calculator that can show you what you may be eligible for.

-Credit Unions:

You may be able to get a mortgage with no down payment or a limited down payment from a credit union-a nonprofit banking cooperative whose members can typically borrow at lower rates.
In order to qualify, you will probably have to meet limited income requirements-such as a maximum of 80% of the median area income. You’ll also need a decent credit score. But the policies can vary widely, so check. For instance, the San Francisco Federal Credit Union recently offered 100% financing for up to $2 million to borrowers with an average credit score of 747 and $219,000 income.

If your in the market and ready to discover what could be your best options contact me. I have excellent lender resources for properties all across Hawaii. Let’s begin your road to owning a home in paradise! Aloha Nui! 


Renee H. Kraft Realtor Broker | Better Homes and Gardens Real Estate Island Lifestyle 808-345-2108 | renee@SearchHawaiiProperty.com

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