Zillow categorizes Hawaii’s housing market as “very healthy,” and home values have risen at a steady clip since their 2012 nadir.
The median price of homes sold in Hawaii is $542,000, which is higher than the national averages. According to the St. Louis Fed FRED Economic Data, the median price of homes sold across the nation is $436,800.
What’s interesting is that, while Hawaii home prices have historically always been high, they’re expected to increase even further.
Homes listed for sale in Hawaii are valued at a median of $624,000, fueling additional pressures on prospective homebuyers in the Aloha state. While this figure represents home prices as they’re presently listed, borrowers are still able to negotiate these prices down.
Hawaii’s unique housing market is greatly influenced by the state’s high cost of living, ocean views, type of home construction, presence of solar energy systems, and tourism, among other variables.
Residents should take stock of current mortgage rates and assess the host of lender qualifications that can impact the total amount of money paid out over the life of a home loan.
Current Mortgage & Refinancing Rates in Hawaii
6 Critical Elements That Affect Mortgage Rates & Refinancing Rates in Hawaii
At a glance, mortgage and refinancing rates may not be as they appear. Lenders may advertise real-time rates on their websites, but these numbers shouldn’t discourage borrowers from pursuing a home purchase, as these are benchmark or baseline rates that are negotiable or can be offset through other means.
Outlined below are seven of those means, or factors, that can increase or decrease interest rates, equating to thousands of dollars on the table every year.
Borrower profile
Profiles are essentially a mockup of who a buyer is, how they’ve handled credit in the past, and whether they might be a significant risk to a lender’s investment. The items that factor into a borrower profile include credit scores, employment history, foreclosure history, personal debt, outstanding loan obligations, and more.
These elements create a more tangible portrayal of a borrower’s total risk, beyond what a more traditional credit score can provide. Lenders use their own scoring systems and scales for determining whether a profile is deemed adequate, thus triggering the beginning of more formal purchasing and refinancing processes.
Credit score
As mentioned, credit scores do play a role in qualifying for a mortgage. Lenders most often prefer credit scores to be 700 or higher (ideally 740+), and borrowers with scores below 600 may find it difficult to obtain home loans without significant assistance in the form of government programs or mortgage insurance.
In the eyes of lenders, high credit scores represent a safer investment. Borrowers with good credit may be able to negotiate interest rates and mortgage terms with more leverage.
Down payment
The amount of money that is paid upfront before the actual start of recurring monthly payments can dictate the overall mortgage rate one receives.
More substantial down payments may result in lower interest rates because borrowers have demonstrated that they are willing to put significant capital into their home purchases, a sign they are committed to meeting all loan obligations.
While a 20% down payment is an industry convention, lenders often accept much lower down payment amounts, especially if paired with mortgage insurance or the backing of a federal program like VA or USDA loans.
Type of loan
The actual type and structure of a loan can vary, which leads to changing interest rate options as well. A fixed-rate mortgage means a borrower pays a fixed percentage of interest on top of their monthly balance. This rate is locked in and remains the same for the duration of the loan.
An adjustable-rate mortgage (ARM), on the other hand, uses more of a floating rate. ARMs most often have a lower, fixed rate of interest for the first five, seven, or 10 years of the loan, after which the rate rises in line with the lender’s terms and benchmark rates.
Jumbo and construction loans often require higher mortgage rates, while VA-, FHA-, and USDA-backed loans can be extended with reduced interest rates.
Refinance type
Similar to how mortgage loans impact interest rates, so too do refinance loans. A cash-out refinance, for instance, may result in receiving a higher interest rate on the new loan, whereas rate-and-term refinances can lead to reduced interest rates. Borrowers should clarify the exact reasons why they are pursuing a refinance in the first place.
Loan lock length
When refinancing a home, borrowers typically lock in a specific interest rate for the first 30, 60, or 90 days. This rate is often lower, an incentive to refinance the loan in the first place. After this period, the loan lock lapses and rates may rise for the remainder of the loan.
Borrowers should try to secure a longer loan lock term (thus saving money) and speak with their lender for potential extensions as well.
How to Get the Best Mortgage & Refinancing Rates in Hawaii
There are many ways for borrowers to obtain the best possible loan option, many of which come down to being informed, surveying several lenders, and being realistic with one’s finances in pursuit of a dream home.
Research rate types
The type of interest rate, as discussed, can be the determinant in paying out tens of thousands of extra dollars over a decade. If a borrower can make a more substantial down payment, plans to earn a higher income in the future, or may sell the home in five years, and adjustable-rate mortgage would be a money-saver.
Plan for future income changes
If a borrower works in an industry with incremental pay increases from time to time, a fixed-rate mortgage may be preferable because his or her income won’t rise too much in the future. Similarly, if a borrower expects to change careers or go back to school, his or her income may flatline or dip.
On the positive side, a young entrepreneur in a tech field may expect rapidly rising earnings in the long term. These fluctuating financial adjustments impact which type of interest rate makes the most sense.
Don’t forget fees
Appraisal, origination, document preparation, title insurance, and application fees can quickly drive up the cost of a mortgage.
Contact several lenders
Borrowers should speak with four or five lenders before signing on the dotted line. Without building a personal rapport with a lender, or fully grasping the intricacies of the mortgage offering, borrowers might be diving into an ill-advised loan obligation.
Shop around
Comparative shopping is perhaps the single best way to secure the ideal mortgage and refinancing rates. The Consumer Financial Protection Bureau estimates only 47% or borrowers shop around, though. Don’t be a part of that 47%!
Recommended Companies in Hawaii
- Quicken Loans: The nation’s largest mortgage lender is also a leader in customer service, as evidenced by its strong performance on J.D. Power’s Primary Mortgage Origination Customer Satisfaction rankings. Quicken Loans provides real-time mortgage rate updates via its website for 15-year fixed, 30-year fixed, 5-year ARM, 30-year fixed FHA, and 30-year fixed VA loans.
- Rocket Mortgage: Rocket Mortgage removes as much of the paperwork and processing as possible when approving applications and granting home loans. Its mortgage solutions are customizable to the needs of borrowers, and applications are approvable in just minutes.
- Lending Tree: Online quotes are immediately available to borrowers through Lending Tree’s convenient mortgage rate tables. The lending exchange connects borrowers with lenders to find ideal mortgage solutions.
- J.G. Wentworth: With a “Get My Rate” feature, J.G. Wentworth offers personalized quotes within seconds without borrowers having to provide personal information or pay hidden fees. This option is available for both purchasing and refinancing.
