Historically, buying a home in Hawaii has been difficult, with the state frequently topping rent and mortgage price rankings. But with an FHA loan Hawaii, homeownership in the islands can be much more accessible, even for those with an imperfect financial history or lower savings. With flexible credit scores and DTI requirements, low down payments, and government assistance programs, an FHA loan in Hawaii can be the key to becoming a homeowner in the Aloha state, especially if you’re a native Hawaiian.
At Defy Mortgage, we provide both traditional and nontraditional mortgage solutions that are fully customizable to fit the unique needs of each borrower. Whether you’re a first-time homebuyer, a freelancer, a self-employed individual, or a real estate investor, we can devise a lending solution that can streamline your path to homeownership.
Although we do not offer FHA loans Hawaii at this time, our extensive experience in providing FHA loans to homebuyers in Colorado, Florida, Tennessee, and several other states has made us deeply familiar with the ins and outs of this government-backed mortgage loan. This guide will cover everything you need to know about Hawaii FHA loans, eligibility criteria, loan limits, and advantages.
Let’s get right into it.
Eligibility Criteria for FHA Loans in Hawaii
An FHA loan Hawaii is subject to the same criteria that any other FHA loan must meet. Before applying for an FHA program in Hawaii, ensure your FICO score is above the recommended minimum, save enough for the minimum down payment, and stay below your lender’s preferred DTI ratio.
Minimum Credit Score Requirements
To qualify for an FHA loan Hawaii, a minimum credit score 580 is generally required, allowing for a 3.5% down payment. However, some lenders may accept scores as low as 500 with a higher down payment of 10%. Buyers with higher credit scores can often secure better interest rates and terms, which can be advantageous in Hawaii’s competitive mortgage market.
Down Payment Requirements and Options
FHA loans require a minimum down payment of 3.5%, making them accessible for first-time homebuyers in Hawaii. Down payment assistance programs are also available that help reduce upfront costs, from county-specific assistance programs that allow payment to be deferred until you sell your home or do a cash-out refinance to second mortgages you can take out to cover down payment and other upfront costs.
If you’re a native Hawaiian or have at least 50% Hawaiian blood, you can also qualify for an FHA loan guaranteed by the Department of Hawaiian Home Lands, which comes with a number of extra benefits, including an even lower down payment at as low as 2.25%.
Debt-to-Income Ratio Considerations
A debt-to-income (DTI) ratio of 43% is typically acceptable for FHA loans, though some lenders may allow up to 50% or beyond depending on your other qualifications. Those with higher credit scores and large cash reserves can be approved for an FHA loan even with a significantly higher DTI than lenders usually accept.
FHA Loan Limits in Hawaii
FHA loan limits can vary significantly across counties to meet each region’s median housing price. Busy areas like Honolulu county on Oahu and smaller islands where space is more a premium like Maui, usually have higher real estate prices, and thus, the FHA loan limits for those counties follow suit. Here’s how FHA loan limits in Hawaii vary per county in 2024:
| County Name | Single-family | Duplexes | Triplexes | Fourplexes |
| HAWAII | $517,500 | $662,500 | $800,800 | $995,200 |
| HONOLULU | $779,700 | $998,150 | $1,206,550 | $1,499,450 |
| KALAWAO | $1,000,500 | $1,280,850 | $1,548,250 | $1,924,100 |
| KAUAI | $1,029,250 | $1,317,650 | $1,592,700 | $1,979,350 |
| MAUI | $1,000,500 | $1,280,850 | $1,548,250 | $1,924,100 |
These tailored limits are set annually, usually around Q4, and take effect on January 1st of the following year. Note that areas with larger loan limits often have higher real estate prices, so it may be best to avoid them if you have a limited budget.
Advantages of FHA Loans for Hawaiian Homebuyers
FHA loans are designed to offer numerous advantages that make them appealing to every American homebuyer. Given Hawaii’s unique housing market, these benefits can be especially impactful in Hawaii.
Lower Down Payments and Flexible Requirements
One of the most significant advantages of FHA loans is their flexibility. They also have lower down payments and credit scores, which benefits many potential homebuyers in Hawaii.
Buyers who may not qualify for traditional loans due to having a high DTI ratio can still secure financing with down payments at a fraction of conventional loan down payments, which usually require borrowers to put down 20-25% upfront. By contrast, FHA loan down payments typically cap at 10% of the purchase price.
With some FHA loan programs in Hawaii requiring as little as 2.25% down, you can purchase a home with minimal savings, even accounting for other upfront costs such as upfront mortgage insurance premiums (UFMIP), usually equivalent to around 1.75% of the loan.
Accessibility for First-Time Buyers and Those with Lower Credit Scores
FHA loans cater specifically to first-time buyers and those with less-than-perfect credit. In Hawaii’s competitive housing market, this accessibility is essential for enabling many to take their first steps toward homeownership, even if they have not built good credit.
The various programs the state of Hawaii offers home buyers greatly help. While there aren’t any programs explicitly targeted to first-time buyers at this time, aspiring homeowners can still take advantage of alternative services dedicated to home buyers in general, such as county-specific down payment assistance programs like the Honolulu Down Payment Loan Program and the Deferred Closing Cost Assistance Loan, which can be deferred for up to 15 years with zero interest and no monthly payments.
There are also other options to reduce the overall cost of homebuying in the state, like mortgage credit certificates for buyers who have not owned a home in the last three years. Hawaii mortgage credit certificates (MCCs) allow qualifying home buyers to claim up to 20% of their mortgage interest payments in tax credits.
Competitive Interest Rates for FHA Loans
Considering their credit score requirements, FHA loans often come with competitive interest rates. Even with the extra cost introduced by mortgage insurance premiums, the amount a borrower pays on top of the principal can still be much less than they would have to pay if they were approved for a conventional loan with the same credit score.
Those with good credit will run into diminishing returns in this regard, so if your credit score is higher than 650 and you can afford to pay a down payment of 20% of the home’s purchase price, it’s usually better to get a conventional loan. This will allow you to get an even lower mortgage rate and avoid paying mortgage insurance. However, if you have a lower FICO score or can’t afford to put 20% down, FHA loans can give you significant savings over the life of your loan.
FHA Loan Hawaii FAQ
What are the current interest rates for FHA loans in Hawaii?
Rates fluctuate, but FHA loans generally offer competitive interest rates compared to conventional home loans. Bankrate lists Hawaii’s average 30-year fixed FHA mortgage rate at 6.7%.
For comparison, the average rate for a conventional mortgage in the state as of November 2024 is 6.81% for borrowers with credit scores far above the minimum required by an FHA loan. Remember to check with the mortgage providers of your choice to learn their current rates.
Can FHA loans be used for refinancing in Hawaii?
Yes, FHA loans can refinance existing mortgages, offering lower interest rates or cash-out refinancing options. The FHA’s Simple Refinance and Streamline Refinance options are only available for properties originally purchased with an FHA loan. Still, FHA cash-out refinancing is available for all loan types.
Are FHA loans available for investment properties?
FHA loans are primarily for owner-occupied homes and are not typically used for investment properties. The FHA does allow borrowers to purchase a multi-unit property and rent out the other units (subletting a room in a single-family does not count) as long as they make the property their primary residence for at least 12 months after purchasing, but they will have to prove self-sufficiency.
What is the maximum loan limit for FHA loans in Honolulu?
Honolulu generally has one of the highest FHA loan limits in Hawaii. For 2024, the loan limits in Honolulu are $779,700 for a single-family home, $998,150 for a duplex, $1,206,550 for a triplex, and $1,499,450 for a fourplex.
Can you get down payment assistance with an FHA loan in Hawaii?
Yes, various state and local programs offer down payment assistance to help reduce upfront costs for FHA loans. In Hawaii, down payment assistance tends to be county-based, with programs like the Maui Department of Housing and Human Concerns Housing Division’s down payment assistance program for Maui residents purchasing a home for the first time. Alternatively, you can take out a down payment assistance loan (DPAL), a second mortgage designed to deal with down payment and other costs during the closing process.
Key Takeaway
An FHA loan Hawaii low down payments and accessibility to borrowers of all financial backgrounds make it ideal for home buying in Hawaii’s expensive real estate market. Coupled with the state’s various assistance programs, securing financing can be very attainable, even in one of the most dynamic real estate markets in the United States.
Increasing your credit score above the FHA’s recommended minimums may be prudent to get the best loan terms if you’re interested in an FHA-backed Hawaii mortgage. Individual mortgage lenders may have their overlay requirements on top of the ones the FHA prescribes, so maximizing your credit score and minimizing your DTI can be good ways to cut down on both monthly mortgage payments and upfront costs, especially in the country’s most expensive housing market.
Would you like to use an FHA loan program to become a homeowner in AL, CA, CO, FL, GA, OR, TN, and TX? Contact Defy today to discuss your options with our mortgage experts, including second liens like a home equity line of credit (HELOC) or alternative loan options such as a jumbo loan or VA loan. Whatever your financial situation, we can find a mortgage solution that fits your needs perfectly.
