For buyers with bad credit, there are other ways to buy a house in Hawaii besides traditional conventional financing. Buyer with bad credit will pay more for financing though than buyers that have good credit. Here are a few suggestions of how buyers alternatives for buying a house in Hawaii with bad credit:
Seller Financing with Land Contracts
A buyer with bad credit who wants to buy a house in Hawaii may be able to get the seller to provide seller financing with an Installment Sale Land Contract (called an Agreement of Sale Contract in Hawaii). Land contracts or contracts for deed are security agreements between the seller/vendor and the buyer/vendee. The seller finances the sale; the buyer retains the legal and equitable title to the property. Upon payment in full by the buyer, the seller with deliver a deed to the buyer.
Another type of land contract is the All-Inclusive (Wrap-Around) Land Contracts. These types of contracts include an existing mortgage. The buyer pays the seller, and the seller pays their lender their regular mortgage payment. If there is any money left over, the seller gets to keep that money. The reason this type of contract is attractive the seller is that if the seller’s existing mortgage has a lower interest rate than the rate on the land contract, the seller earns extra interest on the money that technically does not belong to the seller.
Keep in mind though that most loans today are not assumable or have a due on sale clause which would prevent such a sale from happening because it would trigger the loan be paid in full when the seller transferred title the new buyer.
Rent to Own Hawaii House Program
A rent to own a Hawaii house program is another option for a buyer with bad credit. Hawaii rent to own programs work as follows. The buyer rents their dream house from the seller for a certain term agreed upon by the parties, pays the seller a nonrefundable down payment upfront (option consideration), and a portion of their monthly rental payments are credited towards the purchase price. At any time before the lease expires, the tenant/buyer has the option to either purchase the home or walk away. The owner keeps the rental money and can sell the home to another buyer. This way the buyer has time to clean up their credit or handle any financial issues in order to qualify for a mortgage and buy the Hawaii house.
Paying Cash for the Home
The buyer could always buy a house in Hawaii by paying cash or borrowing the money from a family member. Once they own the home for awhile and have built up some equity, they could take out an equity line of credit against the home for repairs or other reasons, make their payments on time and pay the equity line off, or refinance the home at a later date if necessary.
Co-Borrower
If the primary borrower does not qualify for the loan on their own, they may be able to purchase the home with a co-borrower who has good credit and financial stability. It is common to see two or more borrowers applying for a loan…due to the high real estate prices we see here in Hawaii.
FHA Loan Program
If you want to buy a house in Hawaii and you have bad credit, you may qualify for an FHA loan with 3.5% down payment. Even if you have a foreclosure on your credit, you may qualify for FHA after two years. Under FHA guidelines, a family member, friend or employer would be allowed to grant the funds needed for the down payment.
Read the original: How To Buy A House In Hawaii With Bad Credit
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