Everything You Need To Know About Securing a Hawaii Mortgage – From Pre-Approval & Pre-Qualification To Finding A Local Lender
Home shopping is fun. Browsing online can be a joy! But getting a mortgage is one of the more complicated aspects of buying a home. We’re here to assure you that it doesn’t have to be that way!
Once you’ve found your perfect property, navigating the complex world of offers, contracts, price negotiation, and securing your financing make it all a reality. This is when timing can become a crucial component, ensuring that your is offer accepted.
Doing some pre-planning can go a long way to helping you seal the deal on the Hawaii home you’ve so carefully chosen. It’s best to be prepared by talking to a loan officer before you even start shopping. Here’s what we’ll cover in this article:
1) Why Get Pre-Approved?
There are many reasons to get a Hawaii Mortgage pre-approval. Here are a few of the most important ones:
Pinpoint Your Buying Power: While there are many reasons to get pre-approved before you start shopping for a home, the most important and practical reason is that you will get an accurate idea of how much home you can afford. This will allow you to narrow your search to the homes that actually fit your budget. The home search process can feel overwhelming, don’t waste your time and energy looking at homes that don’t fit your budget.
Put Together a Game Plan: One common thing we hear from potential borrowers is “I think I need to work on my credit first.” If you are not sure if you can qualify for a loan, that is even more reason to start your home buying journey by speaking with a knowledgeable local mortgage professional. Even if you don’t qualify for a loan right now, by talking with a mortgage professional you can at the very least find out where you stand and what hurdles you may need to clear before buying a home.
Another comment we hear is “I’m not going to be ready to buy for another 6 months or a year, so I don’t need to talk to a lender yet.” The pre-approval process is free and doesn’t take much time to complete. Even if you are not ready to buy now it is still a great idea to get pre-approved or at least pre-qualified just to make sure that you will be ready when the time comes. In some cases we will be able to identify potential red flags or “hurdles” that need to be cleared prior to buying a home and that extra time will allow you to put together a solid game plan.
Strengthen Your Offer: In today’s “Seller’s Market” it is very common for a seller to receive several similar offers from seemingly qualified buyers. In these cases the seller and their Realtor have to decide which offer they should accept. One of the main factors in their decision making process is the “strength” of the buyer.
When comparing offers on a home, the Realtor will consider a buyer with a pre-approval letter much “stronger” (less risky) than a buyer who just provides a pre-qualification letter with their offer. Because the pre-approved buyer has provided documentation to verify the accuracy of the information provided in their loan application, the lender is able to run their loan application through an automated underwriting system.
This extra step allows the lender to confidently state the “buying power” of the borrower. In the Hawaii real estate community, Realtors are aware of the difference between a pre-qualification and a pre-approval and it could mean the difference between getting an accepted offer on your dream home and getting passed by for another buyer.
2) Pre-Qualification vs. Pre-Approval
A Pre-Qualification letter provides an estimate of how much a buyer can qualify for.
The letter says that the borrower has filled out a loan application and allowed a lender pull their credit. They borrower is then provided with a ball park estimate of how much they can qualify for, based on the information that they have provided and also, based on their credit report.
A pre-approval requires you to provide documentation (i.e. tax returns, W-2s, paystubs, bank statements, etc.) to verify the accuracy of the information provided in the application. Checklist of items you will need to get pre-approved.
A Pre-Approval makes your offer much stronger when the seller is considering multiple offers.
3) Why Use A Local Lender?
Because Hawaii is a Unique Place To Buy a Home.
Hawaii has some very unique challenges when it comes to lending. In our beautiful state we have properties in lava zones, leasehold properties, condominium property regimes (CPR), water catchment systems, and agriculture zoned properties, among other unique challenges. Each island has its quirks and challenges when it comes to getting a loan approved. Properties with additions that did not obtain a building permit are commonplace. It’s one of many obstacles that can derail a loan at the last minute if it’s not addressed upfront.
An experienced local lender will be aware of potential red flags and how to address these issues. Most importantly they will know which loan programs and lenders will approve loans for these special types of properties.
Furthermore, we have a unique closing process in Hawaii that takes longer than most. A local lender will help you plan accordingly so that you can be assured that you will close on time. Don’t get us wrong, it’s not that an out-of-state lender can never get the job done, it’s just that their track record with closing loans in the state of Hawaii is not nearly as good as local lenders.
Most out-of-state lenders are eager to lend in Hawaii because our loan amounts are so high compared to the national average, so they will almost always claim that they will be able to close your loan on time. The fact of the matter is, they just don’t know what they don’t know…until it’s too late.
Local Realtors know this and all of them prefer that the buyer use a local lender. This is another factor that can help or hurt you when you are up against other buyers when making an offer on a home. Our job is to guide you through the home buying journey and we cannot stress this point enough…”Use a local lender!”
4) Items You Will Need To Get Pre-Approved
- Borrower(s) names as they are to appear on the deed (for homeowners)
- Social Security number(s)
- Driver’s license or other photo ID’s
- Home address(es) for the past 2 years
Employment / Income
- Paycheck stubs for the last 30 days
- W-2s and Personal Tax Returns for the last 2 years
- If self-employed or commissioned, personal and/or business tax returns with schedules
for the last 2 years (year-to-date profit and loss statement and balance sheets may be required)
- Employment information for the past 2 years, including employer, job title, tenure and employer’s addresses
- Social Security or retirement benefit award letters
Assets / Bank Statements
- Most recent 2 months statements (all pages) from banks or other financial institutions
- Source of any non-payroll deposits (order copies through your bank)
- Provide balances for each checking, savings, retirement and asset accounts
- Fully executed gift letter and proof of transfer (if applicable)
Real Estate Owned
- Property addresses for all real estate you own
- Mortgage loan statements for all mortgages
- Other insurance and HOA statements for all properties
- Copy of bankruptcy filing and discharge
- Purchase property information with sales contract and addendums
- Copy of divorce decree and proof of child support (if applicable)
- 12 months cancelled rent checks or management company contact information (if applicable)
- Certificate of Eligibility and DD214 for Veterans