Buying A House In Hawaii: A How-To Guide

Hawaii is widely considered one of the top vacation destinations in the United States. When you’re buying a house, whether it’s as a primary home, a vacation home or an investment property, there are some important things to consider.

Before taking the first steps to buy a house in Hawaii, read this guide to learn about the benefits of buying a home in Hawaii, the average cost and a step-by-step guide to help you get started.

What To Know Before Buying A Home In Hawaii

There are some key benefits to buying a house in Hawaii, but also a few downsides to consider.

• There’s nice weather year-round. One of the most obvious benefits of Hawaii is the weather. The state has mild temperature year-round, meaning both the summers and winters are warm without being too hot.
• Leaseholds are common in Hawaii. In much of Hawaii, leaseholds are very common. Rather than residents buying their own homes, the government and landholders own much of the property, which they then lease out to residents.
• It’s one of the best states to retire in. Hawaii is widely considered one of the best states to retire because of the state’s beautiful weather and rich culture, as well as its access to high-quality health care.
• Home prices and cost of living are high. There’s no doubt that living in Hawaii comes with a high price tag. The state has a higher median home price than any state but California, as well as a higher cost of living. Buying a house here isn’t realistic for everyone.

Can You Afford To Buy Property In Hawaii?

Buying a house in Hawaii is a dream of many people. However, it also comes at a high cost since the state has the second-highest median home price in the country.

According to the Missouri Economic Research and Information Center’s Cost of Living Data Series, Hawaii has a cost of living that’s higher than any other state. Its average cost of living in 2023 was more than 180% the national average.

It’s more expensive than other states in nearly every category, but it has the lowest property taxes of any state. That being said, because home prices are so high, overall housing costs are still higher.

How To Buy A House In Hawaii

Generally speaking, the process and requirements for buying a house in Hawaii are similar to those of buying a house anywhere else. However, it’s still important to know what to expect.

1. Meet The Financial Requirements To Buy A House In Hawaii

The financial requirements to buy a home depend on your loan type. Let’s talk about the requirements you’ll need to qualify for the most popular loan types.

• Credit score: Most mortgage types, including conventional loans, require a credit score of 620 or more. You may be able to buy a home with a lower credit score with a government-backed loan such as an FHA loan.
• Down payment: A conventional mortgage requires a minimum down payment of 3%, while FHA loans require either 3.5% or 10%. Neither USDA loans nor VA loans require down payments.
• Debt-to-income ratio (DTI): Generally speaking, you’ll need a low DTI to buy a home. While some loan types allow a DTI as high as 50%, the ideal target is 36% or lower.
• Income: To qualify for a mortgage, you’ll need to prove that you have a stable income. In most cases, you’ll need to show at least 2 years of stable income, but the requirements vary by loan type, employment type and other factors.

2. Choose The Best Place In Hawaii For You To Live

Hawaii has no shortage of picturesque destinations for you to call home, either as your primary home or your vacation home. However, there are a few that stand out among the rest.

Captain Cook

Captain Cook is named after Captain James Cook, the first westerner to arrive in Hawaii in 1778. It’s a quaint small town located on the western side of the Big Island. It's truly a town of locals, with few hotels and stores, but plenty of outdoor recreation.

Kailua-Kona

Kailua-Kona, the largest town on the west side of the Big Island, is rich in history. It sits at the bottom of the Hualālai Volcano and has historical sites blended seamlessly with its tourist attractions. It’s an ideal place for rental properties, but also for buying a primary residence.

Keaau-Mountain View

Located toward the eastern side of the island, the Keaau-Mountain View region is known for its iconic skyline, featuring one of the world’s tallest dormant volcanoes. The town is just 20 minutes away from the city of Hilo and Hilo International Airport and offers plenty of outdoor recreation activities.

North Kona

North Kona occupies the northwest side of the Big Island, stretching along the shoreline of the Pacific Ocean. It’s home to many resorts and trails, as well as a state park that offers plenty of outdoor recreation, such as hiking, swimming, surfing, fishing and more.

South Kohala

South Kohala is located on the Gold Coast of the Big Island and is one of the most historic regions in the state. It features preserved temples, petroglyphs, village sites and more. There’s plenty of outdoor recreation and exploring for locals and visitors alike.

3. Research Financial Assistance For Hawaii Home Buyers

When you’re buying a house in Hawaii, it’s important to research the various financial assistance programs available. These programs fall into three different categories. It’s worth noting that some of the programs available to Hawaii home buyers are designated for Natives, meaning you won’t qualify if you’re buying from out of state.

First-Time Home Buyer Loans

If you’re a first-time home buyer in Hawaii, you’ll have plenty of loan programs to choose from, including conventional and government-backed locals. Next, the Hawaii HomeOwnership Center (HHOC) offers a mortgage program that offers a low down payment, competitive interest rate and no mortgage insurance.

Down Payment Assistance

Another form of assistance to consider when buying a home in Hawaii is down payment assistance. These programs are generally offered by individual organizations or local governments. For example, the City and County of Honolulu offers a 0% interest down payment loan program for borrowers who have a household income under a certain amount.

Tax Credits And Exemptions

It’s always important to research tax credits and exemptions that may be available when you’re buying a house. Hawaii home buyers are eligible for the federal government’s residential energy tax credits. Additionally, the state of Hawaii offers a tax credit for individuals and businesses in Hawaii who make certain renewable energy investments. Finally, individual cities and counties in the state offer property tax exemptions for renewable energy investments.

4. Hire An Experienced Hawaii Real Estate Agent Or REALTOR^®

A real estate agent or REALTOR^® can be a valuable partner during the home buying process. First, a good agent will know the local market well. This is especially important if you’re not a local and are either moving to Hawaii or buying a vacation or investment property.

In addition to helping you find the perfect property, a real estate agent can help you complete the purchase. They’ll walk you through the underwriting and closing process until you officially own your new home.

5. Get Preapproved

When you’re shopping for a home, it’s helpful to get a mortgage preapproval from a lender upfront. First, preapproval will help you determine whether you’re eligible for a loan and will help you set your budget. Additionally, preapproval can help you stand out to sellers, possibly increasing the chances of having your offer accepted.

6. Make An Offer On A Hawaii Home

Once you’ve gotten your preapproval, you can start shopping for a home. And once you find the perfect one, you can make your offer. Your real estate agent can advise you on a competitive offer that will benefit both you and the seller.

7. Get An Appraisal And Inspection

The appraisal and inspection are two of the most important steps of the home buying process. An appraisal is required by lenders to ensure the purchase price corresponds with the actual home value. The inspection, on the other hand, is beneficial for the buyer because it can help them identify any issues with the home that may need to be repaired when they move in.

8. Close On The Loan

The final step of the home buying process is the closing. It’s what happens after your loan has officially been approved, your appraisal and inspection are complete, and the seller is ready to hand over the keys. Keep in mind that on the closing day, you’ll have to bring funds to pay both the down payment and the closing costs (on average between 3% and 6% of the loan amount).

9. Make Moving Accommodations

Once you close on your home, it’s important to make your moving accommodations to your new home. The cost of moving can range from a few hundred dollars to nearly $10,000 for long-distance moves. If you’re moving within Hawaii, you may be able to move on a budget. However, if you’re moving there from another state, you should expect your moving costs to be on the higher end.

Questions To Ask Yourself Before Buying Property In Hawaii

A new home purchase is a big decision, and it’s important to explore all the factors and considerations. Here are a few key questions to ask when buying a house in Hawaii.

Is buying property in Hawaii a good investment for me?

Whether buying a property in Hawaii is a good investment for you depends on several key factors, including your budget, your goals for the property and more. It’s important to explore the local housing market to get an idea of what you’ll pay for a home. And depending on whether you’re buying it as a primary residence, vacation home or rental property, you may also need to research the local rental market to determine how much you can earn.

What’s the current Hawaii housing market like?

The housing market in Hawaii varies depending on the area you’re looking in. You can look at Hawaii homes for sale to get an idea of how much you should expect to pay. Some areas in Hawaii have strong seller’s markets, while others may be more neutral. The Rocket Homes^SM housing market tool can help you determine whether the area you’re looking is a buyer’s or seller’s market.

What’s the current job market like in Hawaii?

Hawaii has a lower labor participation rate than the national average. This means employers are having a less difficult time finding workers, but it could mean more competition for the jobs available. That being said, the job market will vary significantly depending on your location and your field of work.

Can I buy a house in Hawaii without homeowners insurance?

There’s no law that requires Hawaii homeowners to have homeowners insurance. However, if you purchase your home with a mortgage, your lender will require you to carry insurance. Even if you don’t have a lender to require insurance, it’s advisable in almost all cases.

The Bottom Line: Buying A Home In Hawaii Could Be A Worthwhile Investment

Hawaii is one of the most popular destinations in the United States, and it’s easy to see why. It’s a great place to buy a vacation home, establish a rental property or even buy your primary residence. Before you buy a home in Hawaii, it’s important to get to know the state and its housing market If you’re ready to take the next step on your home buying journey, get approved with Rocket Mortgage^® today.