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Home loan in Puna

A home loan in Puna can make it possible for you to own property that you may otherwise not be able to afford. This can be far superior to renting a home. Even though it has been fairly common until recently that many of the properties in Puna were paid in cash, higher real estate prices have brought about a shift towards mortgages and other financing strategies.

What are the main financing options available to someone who wants to buy a piece of real estate?

Conventional Mortgage (CNV): This is a home loan in Puna with a fixed rate (also called a fixed rate mortgage). This means that for the entire life of the loan the interest rate and principal payment will stay the same and therefore the monthly payment will stay the same. Conventional mortgages are especially popular for easy budgeting, having a dependable position in times of change and when interest rates are low.
Adjustable Rate Mortgage (ARM): This home loan is divided into two phases. An initial fixed rate phase (which can be either 1,3,5,7 or 10 years) and an adjustment phase where the interest rate will go up and down according to the interest rate. Usually there is a limit to how much the interest can go up and down per year and overall. You might be able to refinance or convert to a fixed rate mortgage before the adjustable phase kicks in. This type of home loan in Puna is attractive because it usually starts off with a lower interest rate than the fixed rate mortgage.

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2nd mortgage: A second mortgage is an interesting financing strategy for people who already own a property and don’t want to give it up or who want to buy an additional property in Puna (or elsewhere) as a long-term investment. People also sometimes take out a second mortgage in order to get them through times of financial strain.
FHA and VA: These two kinds of home loans are government loans which are either insured (FHA) or guaranteed (for veterans - VA) by an agency of the Federal government. These loans have a lower closing cost, lower down payment (sometimes even no money down) and more flexible qualifying guidelines.
Land loan: This loan is for those who don’t want to build a home at this point, but have found a spot that they like. It is also for those who want to buy land as a long term investment. After you get approved plans and have signed a contract with a contractor, you can usually refinance a construction loan.

TIP: Many of the cabins in Puna that are on the market are un-permitted, which means you will not be able to get a home loan. You should be able to get a land loan, however. Properties with un-permitted structures are considered vacant land. Those properties are usually only sold in cash or on terms (owner financing). Some people use these unpermitted cabins as a temporary dwelling, while starting to build a permitted house on a different building site on the same property. In some subdivisions this does not always meet with the approval by neighbors who may be situated nearby. They could report it to the county and the county could give you several hundred dollar fine.

Residential construction loan: This loan is usually structured for a 9-12 month drawing period. After that period of time has passed, this loan automatically turns into a fixed rate mortgage or an adjustable rate mortgage, depending on which type you choose. To get approval for this type of loan you need approved plans and a contract with a contractor.
Renovation Loan: This loan is possible in both purchase and refinance situations. Similar to the residential construction loan, you will need approved plans and a contract with a contractor to get this loan approved.
Owner financing: In this type of home loan in Puna, the seller is acting as a lender. The advantage is that a lot of these lenders do not put you through a qualifying process, especially in the case of a land purchase. The disadvantage is that they charge a much higher interest rate than a lending company and sometimes a higher price overall. They oftentimes use land contracts, which means that if you default on the payment at any point, you will loose the property back to the lender. Although this sounds very risky it might be your only option if you have bad credit, no credit, excessive debt, etc.
When considering owner financing you have to look at the big picture. In my opinion, it is still much better to pay a higher rate to have your own property than to just keep throwing your money away in rent. Rent money is money gone forever and it is endless. At least if that same money were going towards owning your own home – even if it costs more – it can never be considered money that has been wasted.
I have seen many people become proud property owners, who would have never been able to do so conventionally through a lending company. So, it is a matter of what your priority is. If your goal is to be a property owner and you are willing to accept that it will cost you more because of your situation then it still may be a good opportunity for you.

Financial Education begets financial freedom…

In the beginning, all these different loan strategies were a bit confusing to me. One late night after watching an infomercial about a financial education course (Carleton Sheets’ No Money Down course), I decided to purchase it. I was skeptical at first, but (believe or not) it was really worth it.

I learned a lot about different financing strategies, creative financing (combination of different financing strategies), bad credit repair, bad credit and loans, building credit, etc. It is mainly targeted towards people who want to be real estate investors, but the knowledge that I gained from it can be used for normal home purchases, too.

For me it was the gateway to understanding the basic principles of real estate. There are a lot of tools and courses out there to help you improve your understanding of the financial options that are available and I encourage you to seek them out. The subject sounds like a big bore to most of us (lets face it - I would rather be practicing my guitar riffs!) but the benefits can profoundly affect your future. Knowledge is freedom, my friend…

So, where do you go, if you need a home loan in Puna or a land loan?

One way is to shop around and compare what the different lending companies offer. Traditionally, you would go to a loan officer of a lending company like a mortgage company (retail mortgage company), credit union or Bank Institute. Bank of Hawaii, First Hawaiian Bank, American Savings Bank and Well Fargo are just a few of the Banks that offer different home loan in Puna and land loan programs.

However, if your profile is not really that good (bad credit, debts, low income etc.), it might be smarter to find a mortgage broker, because he will be able to find the best deal from all the different mortgage and loan companies (wholesale mortgage companies). He does not have to be loyal to just one lending institution like a loan officer does.

Just like it is smart to have a buyer’s agent check for the best-fitting properties for you, it is the responsibility of a good mortgage broker to find the best home loan in Puna for you.

How the lava zones can affect your home loan in Puna:

There is an additional factor that can affect your loan in Puna that you don’t find in many other paces and that is the lava zones. Besides all the usual criteria such as how much you can afford to pay monthly and how much the lender wants to loan you (based on your credit score, employment history, income, assets, debts and residence history) it is also important in which lava hazard zone your desired property is located.

There is usually no problem getting a home loan in Puna for a property in lava zone 3 but it can be a little tricky in lava zones 1 and 2 since this is an added risk to the lender. If all your credentials as a borrower are in good condition, then this should not be a problem, but if you have either bad credit or not a lot of income, lending companies will be much less inclined to provide you with a home loan in Puna, even if you are able to get insurance for your property.

If you really want to find out about how you can save a lot of money on shopping for mortgages, you need to read this ebook called Mortgage Insider. It helped me a lot to understand how the market really works.

Always keep the goal in mind - to get a home loan in Puna that works for you with a low interest rate and a monthly payment you can truly afford.

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