When purchasing real estate in Oahu, you may be surprised to learn that there are actually several different mortgage loan options available from which you can choose. Understanding these options and the differences between them will help you to better determine which of these options is right for you.
Conventional loans are the standard mortgage loans that are backed by Fannie Mae and Freddie Mac. Conventional loans offer the greatest amount of choice in terms of options and can be available with a down payment as small as 3 percent. Mortgage insurance is required, however, when financing with less than a 20 percent down payment. To get a conventional loan, you will need to meet stringent credit requirements.
FHA loans are insured by the Federal Government’s Department of Housing and Urban Developments. Therefore, just as with VA loans, they offer the lowest rates possible. FHS loans are intended to help those with little credit, those with a fair amount of debt and those with past credit issues qualify for a loan. A lower credit rating in the low 600 range will still qualify you for a VA loan, for which you can make a down payment as small as 3.5 percent.
If you are an active duty or a separated member of the armed forces, you are eligible to receive a VA loan. VA loans offer 100 percent financing with total loan amounts allowed up to $1.5 million. Since VA loans are guaranteed by the Federal Government, they offer the lowest rates possible. A lower credit rating in the low 600 range will still qualify you to receive a VA loan.
USDA loans are used to purchase properties located in rural areas. You may be surprised by the types of homes that are included in the “rural” designation in Hawaii. To qualify for a USDA loan, your income has to be below the USDA’s income limit. This amount varies according to the county as well as the number of residents in the household and the number of minor children.
If you do qualify for a USDA loan, you will be responsible for an upfront premium of 1 percent of the mortgage loan amount. This cost can, however, be added to your loan. There is also an annual premium equal to 0.3 percent of the loan. This premium is prorated over 12 months and is paid along with your monthly principle and interest. Both single-family homes and condos can be purchased with USDA financing.
Jumbo loans are used when borrowing an especially large sum of money when purchasing a home. Currently, jumbo loans can be used for loans that are greater than $726,525 in Hawaii. This limit is higher than the mainland states due to the higher property prices in Hawaii. In addition, many mainland lenders will not offer jumbo loans. To qualify for a jumbo loan, you can not have had ay significant financial issues within the preceding five years. All property types, including condo-hotel properties, are eligible for this type of loan.