Buying a Condo in Hawaii
Buying a Condo in Hawaii
We have different classes for the condos on the Big Island of Hawaii, Kauai, Lanai, Maui, Molokai and Oahu. How your condo is classified will affect you when it comes to rental options, financing and property taxes, as well as many mainland lenders are not even aware of these and can create havoc 2-3 weeks into a purchase, another reason to work with a Hawaii lender. Starting a search with “Maui condo for sale” is just the beginning, educate yourself and save some grief.
The three classes you need to be aware of are:
- Warrantable – This type of class means that the condo meets Fannie Mae and Freddie Mac guidelines. This type is considered a warrantable condo and is eligible for “agency” loan programs. There are many factors that determine a condos classification such as the owner-occupancy ratio or whether or not the HOA permits vacation and short term rentals less than 30 days. An owner-occupancy ratio is the percentage of owners who reside in the complex full time as their primary residence or part time as a second home. Warrantable condos must have a 50% or higher owner-occupancy ratio.
- Non-Warrantable – Condos which are classified as non-warrantable are not eligible for the same Fannie Mae and Freddie Mac loan programs that warrantable condos are approved for. Many Hawaii condos fall into this category because even though the condo complex may not posses any hotel like amenities outlined below under the condo-tel classification, it can still be non-warrantable for a variety of reasons, especially if the HOA allows vacation and short term rentals or the owner-occupancy ratio falls below 50%.
- Condo-tel – A term used to describe a Condo-Hotel. A condo-tel possesses some hotel like amenities such as a front desk for checking in and out, an activity or concierge desk, and daily or weekly maid service. Due to Hawaii being a top destination resort many condos for sale operate as a condo-tel. A complex that offers hotel like services or has less than a 30% owner-occupancy ratio will be considered a condo-tel.
Down Payment Requirements
- Warrantable (down payment/max loan amount/loan type):
- 0% down to $625,500 (VA – primary residence)
- 3% down to $625,500 (FHA – primary residence)
- 3.5% down to $790,000 (HomePath – primary residence)
- 10% down to $625,500 (HomePath – 2nd home/investment)
- 20% down to $625,500 (Agency Conventional – primary/2nd home)
- 25% down to $1,000,000 (Portfolio Jumbo – primary residence)
- 30% down to $1,000,000 (Portfolio Jumbo – 2nd home)
- 30% down to $1,000,000 (Portfolio Jumbo – investment)
- Non-Warrantable and Condo-tel (down payment/max loan amount/loan type):
- 3% down to $790,000 (HomePath – primary, 2nd home, investment)
- 25% down to $1,000,000 (Portfolio – primary residence)
- 30% down to $1,000,000 (Portfolio – 2nd home)
- 35% down to $1,000,000 (Portfolio – investment)
- Loans over $1,000,000 (Portfolio – approved on case by case basis)
- Private Mortgage Banking (only high-net-worth investors)
- 40% – 50% down to $40,000,000 loan amount
Lenders on the Mainland
Most mainland lenders are not aware that they can’t finance a Hawaii condo until well into the escrow process. This usually occurs after the appraisal has been completed and your loan has been approved. At this stage, this is when a lender reviews the condo documents, resulting in a decline and the deal falls apart.
While you may be inclined to shop interest rates with a lender on the mainland when purchasing a Hawaii condo or home, working with a local lender in Hawaii, can benefit everyone involved.
Check back for “3 Things To Know Before Buying a Condo in Hawaii”