Wednesday
Aug082012

Financing Your Oahu Property

There are several ways to finance the purchase of real estate on Oahu. The most common are using a mortgage or paying cash, but there are other alternatives, as well. Depending upon the availability and ease of obtaining financing, you may wish to consider alternatives for financing your Oahu property.

Cash

Some buyers of Oahu real estate pay cash for the entire purchase. In this case, the Buyer will usually have to provide proof of liquid cash funds with the offer to buy Oahu real estate or soon after acceptance of the real estate Purchase Contract.

Seller Financing

Oahu real estate may also be purchased using seller financing. Seller financing is a loan for purchase of Oahu real estate provided by the seller of a property or business to the purchaser. Usually, the purchaser will make some sort of down payment to the seller, and then make installment payments (usually on a monthly basis) over a specified time, at an agreed-upon interest rate, until the loan is fully repaid. In layman’s terms, this is when the seller in a transaction offers the buyer a loan rather than the buyer obtaining one from a bank.

To a seller, this is an investment in which the return is guaranteed. For a buyer it is often beneficial because they may not be able to obtain a loan from a bank. In general, the loan is secured by the property being sold. In the event that the buyer defaults the property is repossessed or foreclosed on exactly as it would be by a bank.

There are no universal requirements mandated for seller financing. In order to protect both the buyer’s and seller’s interests, a legally binding Purchase Agreement should be drawn up with the assistance of an attorney and then signed by both parties. This contract between buyer and seller is often also called an Agreement of Sale.

Mortgage Loans

Most buyers of Oahu real estate get financing from a bank or other lending institution. There are many lending institutions that offer a variety of mortgage products. Some of the more common ones are conventional loans (requiring 5% or more down), Jumbo loans (for very large loans), VA (0% down under certain purchase prices) and FHA loans (3.5% down). There are also various combinations of these such as FHA Jumbo and most types of financing have various maximum loan limits. Financing options and rates can vary widely, so it is important to do your research and shop around to ensure you get the mortgage that best meets your needs at the best price.

Buyers of Oahu real estate will usually provide a pre-qualification or pre-approval letter from a lender, from a lender at the time of making an offer of the home for sale. They may also have to substantiate the availability of downpayment or other cash funds used to close.

I would be happy to refer you to some good mortgage contacts I have locally, on Oahu and/or on the Mainland, or to help you in any other way I can to secure the best possible mortgage and rate for your home purchase.

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