Thinking about buying a home in Hawaii? You’re probably already dreaming of sun, surfing, lush green and blue water. There’s a lot to love about living in the Aloha State — but the process of buying property here doesn’t feel like a vacation. As you try to figure out where to live, what to expect, and how much to budget for, use this as a guide to buying a home in Hawaii.
Steps to buying a home in Hawaii
Decide where to live in Hawaii
From a condominium in a downtown Holulu skyscraper to a bungalow on the corner of Kauai, Hawaii offers a wide range of location options. While any place you choose is beautiful, you also have to consider it expensive. And not just the house itself: the cost of living in Hawaii—including transportation, food, utilities, and more—is much higher than what you’ll find on the mainland. Consider this cost-of-living calculation from Bankrate: If you move from Dallas to Honolulu, you should be prepared to cover an 88 percent increase in your budget. Be sure to keep that in mind when determining your home buying budget in Hawaii, making sure you leave enough room for your daily expenses.
Tips for buying a home in Hawaii
One of the most unique things about buying a home in Hawaii is trying to figure out which island to call home. The state consists of a total of eight main islands, but only four of them are widely populated by Hawaiian realtors: Hawaii (also known as the Big Island), Kauai, Maui and Oahu. Big Island is by far the most affordable option. Single-family home sales recorded a 2022 median price here of $457,000. If you look at the other three islands, the median sales price is over $1 million.
That $1 million price tag means you may need to borrow a significant amount of cash when looking at mortgage rates — at which point you’ll want to compare jumbo loan options. In Hawaii, loans over $970,800 will meet the loan limits in 2022. If you are looking at FHA loans, you need to have a tighter budget. For example, FHA loans on the Big Island are held at $477,250.
Things you need to know about buying a home in Hawaii
- Property Tax: Buying a home in Hawaii can be expensive, but property taxes here are very affordable. Compared to tax rates in other states, Hawaii’s property tax rate is very low. According to the Tax Foundation, you can expect to pay an average of 0.31 percent of your property’s value each year.
- Dual Agency: In Hawaii, your real estate agent can represent the seller of the home you are trying to buy. It’s called dual agency, and it’s legal throughout the state — but if it’s the case, your agent is required to tell you before you sign a contract.
- Seller Description: The State of Hawaii requires all sellers to complete a disclosure document detailing their knowledge of the property, including defects and past damage. Please read this report carefully before signing the agreement.
- Closing costs: As in any state, buyers here must set aside additional funds for their portion of closing costs. In the year By 2021, average closing costs in Hawaii — not including conveyancing taxes typically paid by the seller — increased to $5,879, according to Closing Corp. Keep in mind that closing costs vary based on your lender, so be sure to shop for a lender with limited or no origination and underwriting fees.
- Lawyers: Unlike other states, you are not legally required to hire a real estate attorney in Hawaii. You might want to, though. You’ll be investing a lot of money in this transaction, which means it’s wise to have someone on your side who knows how to navigate complex contract language.
- Weather and forecasting; Hawaii’s natural beauty and exotic weather are world-renowned, but don’t forget that you’ll also face nature’s challenges here. About 66,000 residents are located in coastal flood risk zones, according to state data. So you may have to pay extra for flood insurance in addition to your standard homeowners insurance policy. In addition to natural sea level rise, you should think about hurricane insurance to protect your investment from a major hurricane. And here’s a Hawaii-specific consideration you may not have considered: You should make sure your policy covers damage caused by volcanic eruptions.
How Much Home Can I Buy in Hawaii?
Before you think about how much to spend on a house in Hawaii, think about how long you plan to live here. Buying a home comes with a lot of one-time payments, so you need to be sure that you won’t be going anywhere for a while. If this is the case, you may be a good candidate for buying a home.
Now, it’s time to think about what you can comfortably spend. Budgeting for a home can be overwhelming: Use Bankrate’s new-home calculator to help figure out the finances. A general rule of thumb is that you should not spend more than 28 percent of your monthly income on mortgage payments. So, if you earn $7,000 per month, your monthly mortgage payment should not exceed $1,960.
Saving for prepaid in Hawaii
The down payment can be more difficult than trying to buy a home, especially if you are a low-income home buyer. And in Hawaii, because housing prices are so high, it can feel impossible. However, there are a few ways to get some help with that upfront cost. For example, Maui’s First-Time Homebuyer Down Payment Assistance Program can offer up to $30,000 in cash to qualified buyers.
In addition to state and local programs, be sure to consider national down payment assistance options. And if you’re on the waiting list for Hawaii Homelands — a program available only to those with at least 50 percent Hawaiian blood — stay tuned for news from the state capital. Those on a longer waiting list may be eligible for prepayment financing.
Get pre-approved for a mortgage
A mortgage pre-approval is one of the most important home buying puzzles. It serves as proof that the lender has looked at your finances and is likely to grant you a loan. A salesperson can’t take you seriously without it.
Find the best lender for you
You don’t need to find a bank or credit union with a physical branch in Hawaii to get your loan. Many Hawaii loan providers are licensed in the state but conduct their business online. Regardless, finding the best lender for your needs involves comparing a few options to see who can offer you the best rates, lowest fees, and fastest closing times.
Companies like Ribbon and Orchard can give buyers an edge with programs that make your financed offer look like an all-inclusive financing offer – which appeals to the seller as a sure bet. If you’re going out against hot competition, that comprehensive funding offer can make you stand out from the crowd.
Find the best local real estate agent in Hawaii
A knowledgeable local agent can make all the difference when buying a home in Hawaii – especially if you’re relocating here from another state. Getting to Hawaii to visit a hot listing isn’t easy, but if you can find an agent you trust who knows your needs and preferences, you can act quickly and beat other buyers to the property. Finding the right real estate agent is like finding the right lender: you need to research a few different options and ask important questions about how they best suit your personal needs.
Start house hunting and make an offer
Let the fun begin: Now imagine yourself waking up every morning in Hawaii, sipping Kona coffee while breathing in the fresh Pacific air. However, that may not be a lot of properties for sale. According to Redfin, the number of listings is down more than 13 percent from last year. Some places may have very slim pickings. For example, there were 328 sales in Kauai between January and July, according to Hawaii Realtors.
Begin the process with an open mind and a willingness to consider whatever is available to meet your needs. In the future you can always renew, adjust and improve to your liking. Don’t get condos: A typical condo on Oahu costs less than half the price of a single-family home.
Your real estate agent’s expertise is critical—he or she can help you determine a price range that’s appropriate for the local market. They can tell you that about 45 percent of homes are here recently, or that many sellers in the area are lowering their prices and that homes are selling above list price. And when they find one that looks good, they can help you if there’s a wait time or if you want to offer it right away, perhaps even before you get to Hawaii to see it in person.
Get a home inspection and appraisal
They like how the house looks; Now, it’s time to make sure everything you can’t see is in good shape. By passing a home inspection, it is wise to make the offer contingent on the property. Once you move in, a professional inspector will look at your wiring, plumbing, roof, HVAC system and more to make sure there are no surprises.
If you’re getting a mortgage, your lender will also need a professional appraisal. This ensures that the home is worth what you agreed to pay. It is a way to protect the lender if you default on the loan.
Take the final walk and close on your Hawaiian home
Many things can happen between the time you submit an offer and the closing date. So, before you go to your closing, make sure you schedule the final walkthrough. This is your last chance to make sure the house is ready for you in the condition you expect. Watch it closely and then it’s finally time. Go to your closing, sign wherever the various agents tell you to sign, and submit a certified or cashier’s check for your closing costs. Now, say aloha to your new Hawaiian home.