Hawaii Real Estate Buyer Tips—Part 2.
This is a continuation on my blog series on selecting a buyer’s agent and purchasing Hawaii real estate. Many times, people start their search for a home before they know if they can buy a home, or how much house they can afford.
It is important to know what you want and how to get it. Life is too short to waste time going down a path that leads nowhere. If you set the path or have your agent help set up the path, you are much more likely to get where you want to go. We went over these questions on my last blog.
Here are the next few question I wanted to cover:
- How much house can I afford?
- Will my payment go up over time?
- How do I choose a lender?
- How long will it take?
4. How much house can I afford?
This is a very important thing to know. We saw an incredible number of homes being bought during the boom years of 2005-2007 that were much bigger and more expensive than necessary. Too many times, what you qualify for and what you want to spend are 2 totally different numbers.
Many people “qualified” for homes that would soon gobble up 50%-75% of their income—especially when they went for the 2-year adjustable rate mortgage. It would seem reasonable at the time, but 2 years later, that payment would jump an exorbitant amount and that dream home became a nightmare.
There are many factors that come into consideration. How much of a down payment you have will affect what your purchasing power is. There are also many other factors to consider: maintenance fees, association fees, taxes, private mortgage insurance, closing costs, escrow fees, and repair costs.
This is a good topic to discuss with your Realtor and loan officer prior to starting your search. Nail down the price range and then start house hunting.
5. Will my payment go up?
Most people think about their purchase as affordability at the moment in time of their purchase, and if they get a fixed rate mortgage, their payment will remain constant. That is not true. Although the loan payment might remain constant, things like taxes, maintenance fees, and association fees can increase over time and sometimes significantly.
One of my investment condos maintenance fee was $210 per month in 2005 and now it is $375 per month—association fees were $25 and are now $75, taxes were $45 and are now $88. That is an increased cost of $258 per month—that can add up to a large chunk over the years, so keep these things in mind when looking at what you can afford and will the payment go up.
6. How do I choose a lender?
That is big question when buying a property, and again, there are many things to consider when deciding who to borrow money from—they do not all work the same way from processing to customer service to rates and closing costs—these are just a few of the things you will be considering. A great place to start is with the banks you already bank with. You may already have an active relationship. It is often nice to have an individual to talk to about your loan rather than a random servicer overseas.
Often times, if you have a mainland lender, they may not be familiar with Hawaii real estate and they may have lending guidelines that do not work well in Hawaii. Rate is not the only item you want to look at—cheaper is not always better.
If you do not have a lender, your Realtor has likely worked with several and can give you some information on which ones are good at what. The lending sea is endless and in order to wade through the litany of banks and lenders, a mortgage broker may be able to weed through the programs to help you find the one that is right for you.
7. How long will it take?
That is different for everyone. If you have your pre-qualification letter and know which area you want to live in, you could be in your home within 45 days of the starting line. The better the laid out plan, the faster the process. Sometimes, you have to sell a property to buy the new one and that process can be laid out so that the transition is as smooth as possible. Those time frames may be longer depending upon your particular situation.
With some homework done up front, it can be quick or laid out over a long period of time depending upon your needs. Everyone is different about how they want to approach buying a home and a good buyer’s agent can show you alternatives that suit your needs, so that the time it takes is unique to you.
The process of buying a home is completely different for everyone, but the tools and professionals are available to assist you.
Stay tuned for the next installment of “Why Should I use a Hawaii Real Estate Buyers’s Agent.” To ask me your questions, email me. To continue browsing for Hawaii Real Estate click here.
Kelly A. Lee, (R)
Kelly A. Lee, (R) e-PRO, CHMS
Hawaii Life Real Estate
4614 Kilauea Avenue, Ste. 206
Honolulu, HI. 96816