First-Time Home Buyers
Strategies for First-Time Home Buyers
Buying a first home is often stressful, especially when coming up with a hefty down payment is a problem. Don’t despair. There are ways to come up with a down payment enabling you to enter the ranks of homebuyer.
Saving for a Down Payment
Perhaps the best way to save for a down payment is by putting a fixed amount away each month. You can set an automatic deposit from your checking into your savings accounts. Other ways to save include going over your budget with a fine-tooth comb and lowering your expenses as much as possible. The amount you save goes into your down payment account. If possible, consider getting a second job with the proceeds towards your down payment.
IRA Withdrawals
In most circumstances, you can’t withdraw funds from your IRA without a 10 percent penalty until reaching the age of 59 ½. However, if you are a first-time homebuyer, the IRS permits a withdrawal of up to $10,000 for a down payment with no penalties. If you and your spouse both have IRAs, that means you can withdraw up to $20,000. If either of you have parents or grandparents with IRAs, they can withdraw up to $10,000 without penalty to help you purchase a first home.
FHA Loan
If coming up with a substantial down payment for your first home is a problem, or your credit score isn’t terrific, consider an FHA loan. If your score is at least 580, the FHA allows a down payment minimum of 3.5 percent. Even better, the FHA permits a down payment that is gifted to you, so if you generous relatives, you can in effect achieve 100 percent financing. You will have to pay an Upfront Mortgage Insurance Premium (UFMIP) at closing and maintain mortgage insurance for the life of the loan. However, properties located on Hawaiian homelands do not require an UFMIP.
Hawaiian real estate is expensive, but you already know that. FHA loan limits vary by county in the state. In Honolulu the limit is $721,050, while it is $657,800 in Maui and Kalawao and $713,000 in Kauai. In Hawaii County, the FHA loan limit is just $368,000.
Hawaii Housing Finance and Development Corporation
The HHFDC has affordable units available in various developments. If you are a qualified resident – which means you are at least 18 years of age, a U.S. citizen or permanent resident, currently live in Hawaii, will live in the unit and have sufficient income to receive the loan – you are entered in a public lottery drawing for the available properties. Currently, purchase prices range from $250,000 for studio apartments, up to $500,000 for three-bedroom, 2.5 bath single-family unit. If you qualify, it makes sense to fill out an application – someone wins the right to purchase such units, and you could prove the lucky winner.
Contact Us
If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor familiar with all aspects of the Hawaiian real estate market. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.
