First-Time Homebuyer Programs in Hawaii

The down payment on a new home often represents the biggest hurdle for first-time homebuyers. In Hawaii, where the average home value is $855,259, you would need a down payment of $171,052 to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in Hawaii can help you achieve homeownership. Mortgages that allow first-time buyers to put less down on a home also exist, though they usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Hawaii offers grants and loans to assist first-time homebuyers with down payments and closing costs. We have compiled first-time homebuyer programs offered by HHOC Mortgage to help you find the best option for your particular needs and situation.

HHOC Mortgage, a nonprofit affiliate of the Hawaii HomeOwnership Center, helps first-time homebuyers with a household of up to 120% of the area median income (AMI) by providing a second mortgage. The loan offers up to $125,000 in assistance with a low interest rate of 4.5% or the same as the first mortgage, whichever is lower. The program requires only a 3% down payment, exempts buyers from mortgage insurance and has no pre-payment penalties.

The Deferred Closing Costs Assistance Loan offered by HHOC Mortgage is a 15-year deferred loan with no interest or monthly payments. This can be used to cover closing costs, including rate buy-downs. Borrowers can receive up to $15,000 in assistance, with the loan matched on a 6:1 basis. The loan is designed for low to moderate-income households and is available statewide in Hawaii.

In Hawaii, there are zero-down-payment loan programs that allow you to purchase a home without putting any money down. USDA and VA loans are government-backed options that offer this benefit.

USDA loans are designed to assist low-to-moderate income homebuyers in rural areas, providing an opportunity for homeownership without the need for a substantial down payment. The U.S. Department of Agriculture offers these loans through its Rural Development Guaranteed Housing Loan program, aiming to improve the quality of life in rural communities.

USDA loans offer several benefits, including no down payment requirement and competitive interest rates. These loans are backed by the government, reducing the risk for lenders and making it easier for borrowers to qualify. To obtain a USDA loan, you must meet specific conditions, such as purchasing a property in an eligible rural area and using the home as your primary residence.

Eligibility for USDA loans involves several criteria. Your property must be 2,000 square feet or below and located in a USDA-eligible rural area with a population of less than 35,000. Income limits also apply and vary depending on your location. For instance, in Hawaii County, Hawaii, the income limit for a four-person, low-income household is $88,650, while in Kauai County, Hawaii, it is $110,150.

VA loans are a mortgage option provided by the U.S. Department of Veterans Affairs. They are designed to assist veterans, service members and eligible surviving spouses in purchasing a home. These loans offer significant benefits to those who have served in the military, making homeownership more accessible.

VA loans offer several advantages, including eliminating a down payment requirement, which can be a significant barrier for many homebuyers. Additionally, there is no need for private mortgage insurance (PMI), which can save borrowers a considerable amount over the life of the loan. VA loans typically come with lower interest rates than private ones, making them an attractive option. As of November 2024, the APR for a 15-year fixed-rate VA loan in Hawaii is 6.17%, while a 30-year fixed-rate VA loan has an APR of 6.22%.

To qualify for VA loans, applicants must meet specific eligibility requirements. These include a certain length of service or service commitment, duty status and character of service. Borrowers must also meet income limits based on their location and obtain a valid Certificate of Eligibility (COE).

First-time homebuyers in Hawaii can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, making them accessible for borrowers with lower savings. On the other hand, conventional loans may require as low as a 3% down payment for first-time homebuyers but typically have stricter credit score and debt-to-income ratio requirements. This makes conventional loans more suitable for those with stronger credit profiles.

As of November 2024, the current APR for a 15-year fixed-rate conforming loan in Hawaii is 6.10%. In comparison, the APR for a 15-year fixed-rate FHA loan can be higher due to the additional fees and costs associated with government-backed loans.

You can use our FHA vs. conventional loan calculator below to help you compare FHA and conventional mortgage programs and determine the best option for you.

We have answered frequently asked questions about first-time homebuyer programs in Hawaii to help you find the best option and move closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Hawaii to help you with the homebuying process.