Hawaii Real Estate Buyer Tips—Part 3.
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 blogs on the subject.
Here are the links to my previous blogs on this subject, part 1 and 2:
These are the rest of the questions and answers:
- How do I navigate through the process with inspectors, escrow, agents, loan officers, appraisers, and all the other professionals involved in the transaction?
- What is HUD and why do I hear people talk about that?
- What kind of fees will I have to pay?
- What are the differences between escrow fees and loan fees?
- Why do I have to pay these fees?
- How much down payment do I need?
- Who do I talk to about all this stuff?
8. How do I navigate through the process with inspectors, escrow, agents, loan officers, appraisers, and all the other professionals involved in the transaction?
The best way to navigate the process is to have a buyer’s agent assist you in the entire process from finding the property, getting pre-qualified, and finding the necessary inspectors to closing. An agent can help you keep it all on schedule since this is what they do everyday, all day.
9. What is HUD and why do I hear people talk about that?
The HUD statement is a closing statement that is given to both buyer and seller at closing, which reveals in detail what the costs are associated with purchasing property. This document must be prepared and provided to all buyers and sellers of Hawaii real estate. This document helps protect consumers from any “hidden fees,” or surprising costs at the closing table.
Your real estate agent should get a copy of this report as well, so that he or she can make sure that it is compliant with the purchase contract. The HUD is created by the settlement company (Title and Escrow) involved in the transaction. Make sure you keep a copy of this form for your tax preparer at the end of the year.
10. What kind of fees will I have to pay?
There are many fees that need to be paid during and at the closing table of a real estate purchase. You don’t want to be blindsided by a request for thousands of dollars for closing costs. You can use a mortgage payment calculator to give you an estimate of the loan payment, but the loan payment is only what you pay after closing and usually does not include all the fees that you will be responsible for. Here is just a partial list and you can ask your agent or loan officer to see a sample HUD, which can show what to expect.
Points: you hear 4% and 2 points. The 2 points are fees for the loan expected to be paid at closing and each point is one percentage point. $100,000 mortgage—2 points is $2,000. Appraisals, property inspection, taxes, transfer fees, insurance, escrow fees, attorney’s fees, settlement fees, prorated association or maintenance fees, the list goes on. Be sure that prior to starting your home search, you have an estimated idea of how much money you will need to bring to the closing table. It is best to have this all figured before you start your search for a home.
11. What are the differences between escrow fees and loan fees?
There are 3 professionals that work with you from the beginning of your search until the keys are in your hands. There are many other professionals that advise and assist along the way, but these three are there every hour of everyday of your home buying journey:
- Your real estate agent who helps you locate the home, negotiate purchase contract and contingencies, manages the process, and assists in analyzing the property and terms.
- Your loan officer who will pre-qualify you for a loan, take your application, and assist in getting the money needed for the purchase.
- Your escrow officer will hold deposits and monitors compliance by both buyer and seller in adhering to the agreed upon written contract.
Numbers 2 & 3 are two separate entities with two separate jobs, so they each have their own fees for services. They will gladly give you an estimate for those fees once they know which property you will be pursuing.
12. Why do I have to pay these fees?
The plain truth is that in a real estate transaction, there are often dozens of people who handle each part of one real estate transaction. There are many reasons for these fees, but plainly, it is for profit and salary. Everyone who has a hand in your transaction has a family and earns a living by being a part of the real estate transaction. Each company has a responsibility to their owners or shareholders to provide a service and earn a profit.
These are professionals that often deal with hundreds of transactions a year and this is how they earn a living and provide a service. Buying a home is complex and involved. There are many facets of the transfer of property. At closing, as a buyer, you are usually looking at a cost of 3%-4% of the sales price as your costs associated with having all these people contribute to the successful purchase of your investment.
13. How much down payment do I need?
This is an excellent question when buying a home. It would be heartbreaking to search for a house, find the house, and then find out that you do not have enough money to get it. This is why it is important to talk to a loan officer prior to starting your search. Sure, you can browse for houses, but if you really want to start on that road to home ownership, you want to know how much money you need and how much house you can afford.
Although, the easy 100% financing loans for anyone with a pulse are a thing of the past, it is likely that you will need to have some money saved up for a down payment. There are exceptions to the 20% down standard. There are USDA loans, VA loans, and several others that fit into a program that may allow low to no money down. Your Realtor or loan officer can help you find out which loan and property best fits your current situation, both financially and with your housing needs in mind.
14. Who do I talk to about all this stuff?
That one is easy. Call your Realtor. They will guide you through the entire process and assist you from beginning to end. If you do not have a Realtor, I can assist you on the island of Oahu. If you need an agent on another island—I know some very good ones on every island. Call or email me and I will point you in the right direction.
Those are the most common questions we get when a client is starting their search for a home. The process of buying a home is completely different for everyone, but the tools and professionals are available to assist you.
Kelly A. Lee, (R) e-PRO, CHMS
Hawaii Life Real Estate
4614 Kilauea Avenue, Ste. 206
Honolulu, HI. 96816