Planning Ahead For Your Kauai Home Purchase
Are you considering the purchase of a home on the Garden Island? With real estate prices very low right now and home mortgage loan interest rates at historic lows, this a great time to fulfill your dream of owning a home on Kauai.
Proper financial planning is the first step in preparing yourself for the Kauai home buying process. The more prepared you are when you begin the process, the better chance you will have to secure the best mortgage loan terms and interest rates.
Here are the main things to consider as you prepare to buy a Kauai home.
Credit Reports and Credit Scores
To ensure that you qualify for a home mortgage loan with the best interest rate possible first check your credit report from three main credit reporting companies – Experian, TransUnion and Equifax.
The central site AnnualCreditReport.com will provide you with one free credit report (officially known as a credit file disclosure) each year from each of the main reporting companies.
Analyze your credit reports very carefully, checking for any errors. Make sure you that have paid off any delinquent debts, collections or judgments against you. These represent a potential lien on the property you are purchasing and so they need to be taken care of before you get a home mortgage loan.
While you cannot erase negative items on your credit report (unless they are false), you should go about doing everything you can to improve your credit score from this point forward.
The higher your credit score, the better terms you will get on your home mortgage loan. Better loan terms will translate to lower monthly mortgage payments. For more information about credit scores see Kauai Real Estate-Credit History and Home Mortgages.
Reduce Your Overall Debt
Reducing the amount of money you owe will improve your credit score. If possible, pay off any credit card debt as well as other outstanding debts even if the money is not yet due.
A reduced amount of overall debt improves your utilization ratio which reflects your available credit, and also improves your debt-to-income ratio which is the percentage of your income needed to pay your monthly debt. Improving these ratios will reflect positively on your credit score.
Save Money for Down payment and Fees
The more money you have for a down payment on your Kauai home purchase, the more likely you are to receive a better interest rate on your home mortgage loan. You will also need money for closing costs and other fees associated with the home purchase.
Costs incurred in a Kauai home purchase may include: the loan application fee (including credit report and appraisal); loan origination fee; loan points; title insurance; mortgage recording fee; homeowner’s insurance; private mortgage insurance (PMI); a home inspection fee; escrow fees; and a loan impound account to cover insurance and property tax payments.
Develop A Home Buying Budget – Consider Mortgage Loan Options
Have a plan in place before you contact a mortgage broker so that you know how much money you have available and how much you can afford to spend on a home purchase.
Then consult with several lenders to compare their rates and weigh the pros and cons of different loan packages. Choose the home mortgage loan that is right for you and your particular financial situation. Also see Hawaii Home Mortgage Loan Types.
Before committing to a particular mortgage make sure to investigate special government or employer programs that may provide you with more options. For example, a first-time home buyer may be eligible for a reduced interest rate or a lower down payment. Also see Getting An FHA Loan To Buy a House On Kauai.
The extremely low interest rates currently being offered on home mortgage loans makes this a great time to lock in a 30-year fixed rate mortgage that will protect you against future rises in interest rates. However, you may choose a different type of mortgage depending upon your particular goals and financial situation.
Get Pre-Qualified for a Home Loan
Once you have consulted with your Realtor and found a home that you wish to purchase, ask your mortgage lender for a pre-qualification letter. Also see Pre-Qualification for a Kauai Home Mortgage Loan.
Learn the Details of Your Home Loan
Once you have applied for a home mortgage loan ask your lender to provide you with a Good Faith Estimate of the closing costs of the loan and other details associated with the loan. For example, if you wish to pay the loan off before it is due will you be subject to prepayment penalties?
Contact A Qualified Realtor
One of the most important things you can do when buying a Kauai home is to find a knowledgeable and competent Realtor who can help you avoid wasting time and money as you navigate the many facets of the home buying process.
A competent Realtor will assist you in finding the home of your dreams while ensuring that you avoid the significant problems that come when there is a lack of professionalism in what may be one of the most important business transactions of your life.
You can discuss in detail with your agent exactly what type of home you are looking for including the location, architectural style, design features and other factors. Your Realtor will then perform a detailed search of all available properties to narrow them down to properties that meet your specific criteria, showing you only those properties that will meet your needs.
Making An Offer for Your Kauai Dream Home
If you find a property that you like, your Realtor will help you determine what a reasonable offer would be, based upon the property’s features as well a consideration of the current real estate market including recent sales and comparable sales in escrow at the time.
A professional and experienced Realtor will also help the home buyer structure the transaction in the way that is most beneficial to the buyer’s interests including the financing terms, time schedule and any contingencies that may be needed in order to protect the buyer.
Kauai Realty Services and Vacation Accommodations
If you are considering buying a home on Kauai you can see some of the island’s best real estate deals by browsing through the Coldwell Banker Bali Hai Realty Kauai Real Estate Galleries, or use the Map-Based Kauai Home Search.
For the finest quality Kauai vacation rentals including luxury estates, condos, cottages and beach villas, see our Kauai Vacation Rental Galleries or use our new Map-Based Vacation Rental Search feature.
Also please feel free to give us a call. The Bali Hai Realty staff will be happy to help you find the perfect Kauai vacation rental or assist you in the process of buying or selling a Kauai home. We also offer the highest level of personalized Concierge Services to help you plan your Kauai vacation activities.