For home buyers today, there are two mortgage programs that offer 100% financing.
The first is the VA loan from the Department of Veterans Affairs. It's available mostly to active duty military personnel and veterans nationwide.
The other is the U.S. Department of Agriculture's Rural Development Single Family Housing Loan Guarantee Program. The USDA home loan is sometimes called a "Rural Housing Loan" or a "Section 502" loan.
Similar to FHA loan, USDA does not generate the loan. It insures mortgage lenders against loss 100%. The program is meant to drive homeownership in rural and underdeveloped areas.
The USDA Home Loan program in Hawaii offers very low interest and mortgage rate than any other institution. USDA home loans in Hawaii also offers the options for renovation, repairing, building a home from scratch and even paying off old debts.
The USDA does change its "rural areas" fairly regularly and an expanding town is apt to lose its rural loan eligibility with the next census. Homes which are USDA-eligible today may not be USDA-eligible next year.
Benefits of a USDA Home Loan
USDA home loans are very similar to conventional loans backed by Fannie Mae and Freddie Mac.
Unlike conventional loans, USDA home loans have no down payment requirement, which allows a home buyer to finance up to 100 percent of its purchase price. The U.S. Department of Agriculture assesses a two percent mortgage insurance fee to all loans, and the cost may to be added to the loan size at the time of closing, as can the costs of eligible home repairs and improvements.
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You can't do that with a Fannie Mae or Freddie Mac loan.
Another benefit is that its annual mortgage insurance fee is just 0.40%, which is less than half of most private mortgage insurance charged on a comparable conventional loan, and only one-fourth of what the FHA will charge.
USDA home loans do not have loan size limitation, which means home buyers can theoretically borrow more money with a USDA mortgage than with a conventional, VA or FHA loan.
Loans insured by the U.S. Department of Agriculture are available as 30-year fixed rate mortgages only, and come with their own USDA Streamline Refinance program.
Qualifying for USDA Home Loans in Hawaii
The factors that will determine your USDA eligibility are current income, credit history and also the zip code of the country where the home is situated. USDA loans are specifically for moderate to low income households thus; there is an income limit for each USDA home loan eligible county.
To be eligible for USDA Home Loans in Hawaii, your yearly income should be less than 115% of the average median income for that area. You will qualify for a USDA Loan if your income is quite less than the average median income.
Check here to see if you meet the USDA Loans Income Requirements
You should have an average credit score of at least 640, maintain a steady flow of income, and should have no foreclosures that are unsettled and no bankruptcies in the past 3 years.
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Other qualifying criteria:
• The subject property must be a primary residence
• The buyer must meet a qualifying ratio of 29 percent for housing costs; and 41 percent for total debt
• The buyer may not own another home within commuting distance of the subject property
Most importantly, the property must be located in one of the USDA designated areas. USDA property eligibility is determined by census tract density. USDA designated rural area usually has a population of less than 20,000 residents. Because of the way the USDA defines "rural", there are plenty of ex-urban and suburban neighborhoods nationwide in which USDA loans can be used.
USDA-designated areas in Hawaii:
Big Island – all areas except Hilo
Kauai, Lanai, Molokai – all areas
Maui – all areas except Kahului and Wailuku
Oahu – Village Park and Royal Kunia subdivisions, Ewa Beach, Makakilo, Kapolei, entire Waianae Coast, Central Oahu from Whitmore Village North to North Shore and Kunia, entire North Shore, Windward Oahu from Kahuku South to Ahuimanu, Waimanalo from Olomano Golf Course to Sea Life Park.
If you fulfill all these criteria, you should be eligible for a USDA Loan in Hawaii.