Expensive Hawaiian Homes Now Accessible with Jumbo Mortgages

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Hawaii offers homebuyers some of the priciest properties in the country. The limits on jumbo loans are set higher than $720,000.

Since Hawaii offers so much in terms of beaches, golf fields and surfing opportunities, residential properties have steep prices here. In order to encourage buyers in this part of the country to make a purchase, lenders have set the jumbo loans limit at $721,000, almost $300,000 higher than the threshold in other parts of the U.S. where the limit is $417,000.

According to the Hawaii Board of Realtors, in June the median sale price for a single-family residential property was $700,000, with a 3.4% increase from the previous year. The priciest residential market in Hawaii is Honolulu. As shown by the University of Hawaii Economic Research Organization, the median home price for the capital city is estimated to increase up to $773,800 in 2015 and as much as $826,000 in 2016.

Paradoxically enough, the typical jumbo-loan borrower will have difficulties finding a high quality home. A home close to downtown is out of reach as its price is too high to be covered even by a jumbo loan.

The explanation for this home crisis lies in the slow process of residential construction compared to increasing demographics. Prices for labor and materials have also increased significantly contributing to driving up home prices. The low land availability is also an issue responsible for the current state of facts.

Home buying battles are a reality for people shopping for a family home. Flipping dozens of homes is something people in Hawaii have to put up with. The home hunt is intense, the properties that come on the market are scarce and they sell rapidly.

A dream home in a good area of Honolulu with five-bedrooms, four baths and a swimming pool gets listed for $2.2 million, and within 24 hours from being listed it already has 20 offers, of which many are in cash. How can a prospective buyer win in such a situation? Thinking of getting ahead of the other offers takes sometimes things to the limit.

Making a bid equal to the asked amount is not enough in some cases. In the above example, one family chose to make a $50,000 nonrefundable deposit and agreed to make the deal regardless of the results of the home inspection. This family’s creativity moved them ahead of the other bidders. After receiving a $1.1 million jumbo mortgage by the Bank of Hawaii, with a 50% down-payment, they also agreed to pay for the house in cash in case the financing was no longer available through the loan.

According to the Hawaii Bureau of Conveyances, for the January-May 2014 interval, figures showed major growth for the Hawaii homes purchased with loans over $625,500. The increases were both in number (13%) and in dollar volume (14%), compared to the same period last year. There are variations in jumbo thresholds depending on the island: $626,750 on Maui, $713,000 in Kaui and $721,050 on Oahu (where Honolulu is located).


According to Joy McLaughlin head of the residential mortgage division at First Hawaiian Bank residents from continental U.S. are the major borrowers of jumbo loans. Such buyers are looking for a luxury second home in the islands to benefit from the numerous advantages of this resort state.

Jumbo products have been expanded to meet the demand for residential properties. A relevant example is the new 10-year adjustable-rate jumbo mortgage introduced in January by Bank of Hawaii.

There are a few aspects to bear in mind in order to qualify for such a jumbo loan:

  • Meet the prequalification requirements! They are essential for getting the best rates possible:

–          A 20% to 25% down payment – the amount varies depending on the size of the loan;

–          A 45% debt-to-income ratio;

–          A high credit score.

  • Be prepared for additional costs! Flood insurance is a necessity for properties near the ocean. Furthermore, you will pay more in homeowner-association dues in Hawaii than for a residence in continental U.S. This is a factor that matters in the calculation of the borrower’s debt-to-income ratio required for mortgage qualification.
  • Buy the property you can afford! If you can’t afford a jumbo loan for a house, get a condo. There has been a 9.1% increase in the median sales price of condos since June 2013, but the prices are ranking around $360,000. And several new condo projects are being constructed in Honolulu at present.

It’s important to purchase property that you can afford, as the debt on a jumbo loan may be really tough to handle.

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