What to do—and not do—when purchasing your first house
Buying a home is a common goal, especially for families with children. Renters enjoy some benefits—including being able to call the landlord when the pipes burst or the fridge is on the fritz—but there’s something uniquely special about having a place to call your own.
Obviously it’s out of reach for many on Maui, where the median price for a single-family house hovers around $1 million. Sadly it’s unfeasible for many working-class people.
But for those intrepid folks who want to take the plunge, here are some tips.
Make sure you’re ready. Tempting as it is to own a piece of this beautiful island, buying above your means can saddle you with crippling debt, threats of foreclosure, and more. The average mortgage term is 15-30 years, and most first-time home buyers will be taking out a loan. It’s wise to have savings that can cover three to five months of expenses and a stable income to avoid falling far behind on payments.
Figure out how much you can put down. The higher your down payment, the better your interest rate will be. The typical range is three to 20 percent. Lenders give lower rates for larger downs under the assumption that the more money a buyer invests in the property the less likely they are to miss payments and lose the house.
Keep your credit score up. If you’re looking for a mortgage preapproval, don’t let your credit slip. Pay your taxes, stay up to date with your bills, and don’t take out any new credit cards. Lenders are bottom-line, and you won’t be able to get the loan you need if your credit score is low.
Start modestly. Other than the highly in-demand affordable housing projects that have been built or are in the works, there is no such thing as an inexpensive home on Maui. But there are more-modest options. They may not have all the amenities you’re dreaming of, but it’s best to start small and work your way up rather than going for your dream home out of the gate (unless, of course, your rich uncle just left you his fortune).
Work with a real estate agent. Yes, they’re salespeople. But they also can help you find places in your price range, the area or areas of the island you’re interested in, help you negotiate with the seller, and generally do a lot of the legwork and paperwork you probably don’t want to do.
Hire an inspector. An appraisal only gives an estimate of how much a house is worth based on comparable properties. An inspection can reveal details about a specific property and any issues that could bring the cost down.
Keep your paperwork in order. Buying a home requires a lot of documents. Scan them and save them digitally, but save your paper copies as well, and keep them organized.
Remember closing costs. In addition to your down payment, you’ll pay a closing cost to your lender for creating the loan, getting the appraisal, etc. In Hawai‘i, the average closing cost is more than $7,000. Sometimes, the seller will pay a portion of the closing, and this is where a real estate agent can help you negotiate.
Don’t get too stressed. Making what will possibly be the biggest purchase of your life while navigating a sea of documents and legal jargon can make anyone’s brain swim. Try to keep a level head, be patient, and work with people you trust.
Celebrate. Once you’ve made it through the maze and are moving in your furniture, don’t forget to stop and appreciate what you’ve accomplished and the many memories you’ll make in your new home.