Realtor Phyllis Hamilton was recently feted by her co-workers on the occasion of her 86th birthday. Hamilton, who came to Hawaii to “retire,” started a second career in real estate and now has almost 30 years of experience. An agent with Sleeping Giant Sotheby’s International since 1990, she has more listings and properties in escrow than many agents half her age. Known as the “Queen of Sun Village,” Hamilton specializes in sales and rental property management at the Lihue condominium project where she resides. 

Too good to be true? Not with a little-known federal home loan program (Rural Housing 502, a.k.a. "the USDA Loan") which allows home buyers to purchase rural property with NO MONEY DOWN. This loan is available for specified "rural" areas - and all of Kauai and the Big Island are designated rural!

This loan is not just for first-time buyers. But keep in mind, the USDA Hawaii borrower/s cannot hold title to any other property and must meet the program's debt-to-income ratios.

The total annual income limits are as follows:
     1-4 persons: $88,350
     5-8 persons: $116,600

The co-borrowers do not have to be related, but they must all live in the subject property. Currently, interest rates are running around 5.25% with no points, or as low as 4% with points. There is no PMI or prepayment penalty, and the seller can contribute up to 6% towards closing costs . (In other words, the seller can even sweeten the deal by paying points and/or closing costs.) The loans are full doc, and most lenders require a minimum 620 FICO score, although lower scores may be considered.

Here is a possible scenario for 1-4 borrowers with an annual combined income of $88,000:
    Monthly income: $7,333
    Maximum housing payment: $2,126 (less approximate taxes and insurance) = $1,826

At a 5.5% interest rate, $1,826 will cover principal and interest on a $320,000 loan. At 5%, the loan amount rises to $340,000, and at 4.5% the loan amount equals $360,000. In many cases, that means buyers can own for the price of rent, and reap all the advantages of home ownership. And first time homebuyers may also qualify for the $8,000 federal tax credit—with the remainder payable in cash if the filer does not owe the full amount. (This program affects transactions between January 1 and November 30, 2009, and different income limits apply: 75K maximum for singles, and the buyer must stay in the home for three years—or pay the rebate back).

Rural USDA loans do not limit the size of the lot purchased, but the lot value (as determined by an appraiser) should not exceed 30% of the value of the total package (house and land).

This loan program should enable scores of buyers to take advantage of the hundreds of affordable condos and homes currently offered on Kauai. Remember, low interest rates and NO MONEY DOWN!

For more information, call Laura Merrifield at Central Pacific HomeLoans, 808 223-5207.