7 Steps to Buy Your First Home in Honolulu

Buying your first home in Honolulu can feel overwhelming, but breaking it into clear steps makes the process manageable. Here's what you need to know:

1. Assess Your Finances: Honolulu's median home price was $950,000 as of December 2024. Use the 28/36 rule to budget and check your credit score for mortgage eligibility.

2. Secure Financing: Get pre-approved for a mortgage and explore local assistance programs like those from the Hawaii HomeOwnership Center or the Honolulu Down Payment Loan Program.

3. Find a Local Real Estate Agent: Work with someone familiar with Honolulu's unique market dynamics, including leasehold properties and military influences.

4. Set Priorities: Define must-haves versus nice-to-haves and research neighborhoods like Hawaii Kai, Metro Honolulu, or Kailua to find the best fit.

5. Search and Make an Offer: Use listing alerts and act quickly. Offers close to asking price (96%-99%) are typical. Strengthen your bid with earnest money, flexible terms, or escalation clauses.

6. Inspections and Escrow: Schedule a home inspection (costs $300-$850) and complete the appraisal. Follow Hawaii's escrow process, including notarized documents and "Good Funds" law compliance.

7. Close the Sale: Review closing documents, conduct a final walkthrough, and finalize the purchase.

Buying in Honolulu requires planning, patience, and working with experts to navigate the city's high prices and competitive market. Start by understanding your financial readiness and partnering with a knowledgeable agent to guide you through the process.

From Aloha to Escrow: Secrets Every Hawaii First Time Buyer Should Know!

Step 1: Check Your Financial Readiness

Before diving into home searches, it’s crucial to get a clear picture of your financial situation. Honolulu’s housing market, with its higher-than-average prices, demands careful planning.

Calculate Your Budget

Start with the 28/36 rule: spend no more than 28% of your gross income on housing and keep total debt payments under 36%. Online mortgage calculators can help estimate your monthly payments based on these guidelines.

Consider whether buying or renting is the better option for you. In Honolulu, the average rent is $2,626, significantly higher than the national average of $2,049. If you plan to stay long-term, buying might be more economical, but keep in mind that homeownership comes with extra costs like maintenance, insurance, and property taxes. Also, research neighborhoods that fit your needs and budget. Recent reports show a 2.0% drop in local home values, which could influence your decision.

Once you’ve outlined your budget, check your credit score to ensure it aligns with lender requirements.

Check Credit Score Requirements

Mortgage options vary, and so do their credit score requirements:

• Conventional loans: Usually require a credit score of at least 620.

• FHA loans: Accept scores as low as 500 with a larger down payment, or 580 for a down payment of 3.5%.

• VA loans: While they don’t have strict credit score minimums, lenders often prefer scores of 620 or higher.

• USDA loans: Typically require a minimum score of 580.

If your credit score needs work, take steps to improve it. Pay down credit card balances, avoid late payments, and dispute any errors on your credit report. You can access your credit report for free once a year at annualcreditreport.com.

Calculate Upfront Costs

Upfront costs in Honolulu are no small matter. In 2024, the median down payment in Hawaii was $128,000 for the first three quarters. For conventional loans, down payments typically range from 5% to 20%. On a median-priced home of $572,167, a 20% down payment would be about $114,433. If your down payment is less than 20%, you’ll likely need private mortgage insurance (PMI).

Closing costs are another factor, usually ranging from 2% to 5% of the home’s purchase price. These costs cover items like loan origination fees, appraisals, and title insurance.

Don’t forget ongoing expenses. In Oahu, the average property tax rate is 0.85%, which would mean about $4,863 annually for a $572,167 home. You’ll also need homeowner’s insurance, and flood coverage is strongly recommended due to natural disaster risks.

Lastly, budget for moving costs, utility deposits, and any immediate repairs or maintenance. Having a financial cushion for unexpected expenses will help you navigate the process smoothly.

Once you’ve assessed these factors, you’ll be ready to explore mortgage options and local assistance programs.

Step 2: Get Financing and Find Local Programs

Once you've assessed your budget, the next step is securing the funds you'll need. Getting pre-approved for a mortgage and exploring assistance programs specific to Honolulu can give you a strong edge in the city’s competitive housing market.

Get Pre-Approved for a Mortgage

Pre-approval is key to understanding how much you can borrow. It involves a lender reviewing your financial situation to determine your borrowing limit, giving you a clear idea of your purchasing power.

This process not only simplifies the home-buying journey but also makes you a more attractive buyer. Sellers in Honolulu - where the median home price hit $950,000 in December 2024 - are more likely to take your offer seriously if you're pre-approved. It shows you're ready to move forward, not just window shopping.

During pre-approval, lenders will examine your credit score, income, debt-to-income ratio, employment history, and assets. A loan professional can walk you through the process, help you understand your credit profile, and guide you toward the right mortgage options.

Timing is everything. Once you start the pre-approval process, avoid making any big purchases or financial changes until after closing. These actions could impact your credit and jeopardize your loan approval.

Reach out to mortgage lenders early to understand the eligibility requirements for different loan types. Knowing your options upfront will help you choose the best loan for your situation.

Once your financing is lined up, it's time to look into local assistance programs that can help offset costs.

Find Hawaii-Specific Assistance Programs

Hawaii offers several programs designed to reduce upfront costs, such as down payment assistance. These programs can be a game-changer for buyers navigating the state’s high housing expenses.

The Hawaii HomeOwnership Center (HHOC) is an excellent starting point. Their mission is clear:

"The Hawaii HomeOwnership Center will provide education, information and support to create successful first-time homeowners in Hawai'i. By addressing barriers and increasing rates of home ownership, the HomeOwnership Center aims to build stronger families and communities throughout the state of Hawai'i."

HHOC offers valuable programs like the Down Payment Assistance Loan Program, which requires just 3% down, has no mortgage insurance, and features low monthly payments. They also provide a Deferred Closing Cost Loan, a 15-year interest-free loan with no monthly payments. This program matches your contribution on a 4:1 basis, offering up to $10,000 for down payment and closing costs.

City and county programs also offer support. The Honolulu Down Payment Loan Program provides up to $40,000 in zero-interest, zero-fee loans with a 20-year repayment term. When combined with HHOC programs, buyers can access significant assistance to cover upfront costs.

In February 2025, the Office of Hawaiian Affairs (OHA) introduced a new option: the AHO Program. This pilot program, backed by $1.5 million, guarantees portions of home loans through American Savings Bank (ASB) for eligible Native Hawaiian buyers. Qualified participants can purchase homes with just 3% down and no private mortgage insurance (PMI), potentially saving $250 to $800 per month. To qualify, applicants must be Hawaii residents verified through OHA's Hawaiian Registry Program, first-time homebuyers, and intend to live in the property.

Credit unions also offer tailored programs. HawaiiUSA Federal Credit Union’s First-Time Homebuyer Mortgage Program allows for as little as 3% down, flexible income limits, and may waive loan origination fees.

Don't forget about the Mortgage Credit Certificate (MCC), offered by the Hawaii Housing Finance and Development Corporation (HHFDC). This tax credit reduces your federal income tax liability, freeing up more income for mortgage payments. Contact an HHFDC-approved lender to check availability.

Take the next step by attending a first-time homebuyer webinar to learn about these programs. Assistance options can vary by location, so check for programs specific to your city, county, or island.

With financing and assistance options sorted, it’s time to gather the documents needed to secure your loan.

Gather Required Documents

Getting organized is crucial for a smooth application process. Lenders will need documents to verify your financial situation, including your income, assets, debts, and credit history. These details help them determine how much you can afford and match you with the right loan program.

Michael Manago, a senior residential loan officer at Bank of Hawaii, stresses the importance of preparation:

"These are documents that are readily available and that you should have easy access to."

Here’s what you’ll need:

Category	Documents
Income Verification	Most recent 30 days of pay stubs, W-2 forms for the past two years, full tax returns for two years (plus year-to-date profit and loss statement if self-employed)
Assets/Funds	Bank statements from the last three months (checking, savings, money market), investment account statements, gift affidavit if using gift funds
Debt Information	List of all current debts with account numbers, balances, and monthly payments, plus the last three statements for each account

Additional documents include a copy of your driver’s license, social security card, and a list of employers over the past two years. If you've had employment gaps, include a letter explaining them.

Once you’re under contract for a property, you’ll also need a signed sales agreement, proof of your deposit, and contact details for all parties involved, such as realtors and attorneys.

Responding quickly to document requests can help avoid delays. Preparing these materials ahead of time keeps the process moving and positions you to act fast when you find the perfect home. With financing secured and assistance programs in place, you’ll be ready to team up with a real estate agent to start your search.

Step 3: Find a Local Honolulu Real Estate Agent

Teaming up with a local real estate agent is a smart move when navigating Honolulu's unique housing market.

Why Work With a Local Agent?

Local agents bring a wealth of knowledge to the table. They understand neighborhood trends, property values, and the finer details like school districts, nearby amenities, transportation options, and even future developments. Many agents also have access to exclusive listings and can perform a competitive market analysis (CMA) to ensure you're paying a fair price.

When it comes to negotiations, their expertise truly stands out. Real estate broker Chelsea Richardson emphasizes:

"A good real estate agent facilitates clear, effective negotiations."

Strong negotiation skills can save you thousands by securing the best deal and managing counteroffers effectively. Homebuyer John Tremble shares:

"Having a skilled negotiator by your side can make all the difference in getting the home of your dreams at the right price."

Local agents also handle the entire buying process, ensuring everything runs smoothly from the initial offer to closing day. Communication is key, as brokerage owner Myron Kiriu explains:

"Being able to get ahold of your agent may make the difference between acquiring your dream home and losing it."

With their guidance, you'll have a smoother and more informed home-buying experience.

What Richmond Realty Hawaii Offers

Richmond Realty Hawaii has been a trusted name in the Oahu real estate market since 1972 [38,42]. Their team specializes in helping first-time homebuyers, offering full-service support throughout the entire process - from finding the right property to negotiating deals and finalizing the purchase.

Their services include assistance with property searches, home valuations, and buyer representation. Past clients frequently praise their professionalism and expertise. One client shared:

"Thanks to Howard's efforts, my home selling experience was incredibly easy and efficient. His negotiation skills and market expertise truly set him apart from other realtors."

Another client added:

"Howard is a great agent to work with. He has handled my mom's property and all she needs surrounding it. I would highly recommend Richmond Realty."

Known for their personalized service and dedication, Richmond Realty Hawaii has earned a solid reputation, reflected in their 4.0-star rating on Yelp.

With Richmond Realty Hawaii by your side, you'll be well-prepared to dive into Honolulu's real estate market and find the perfect home.

Step 4: Set Your Needs and Research Honolulu Neighborhoods

Once you've secured financing and partnered with a local agent, the next step is to define what you're looking for in a home. This clarity helps streamline your search and ensures you're focusing on properties that truly meet your needs. Honolulu is home to a wide range of neighborhoods, each with its own personality and perks, so it's important to explore these options with your criteria in mind.

Define Your Home Buying Criteria

Start by making two lists: one for your "must-haves" and another for your "nice-to-haves". Your must-haves should include the essentials - things you can't compromise on - like the number of bedrooms and bathrooms, square footage, proximity to work or schools, and whether you need a garage.

The nice-to-haves list can include features that would be great to have but aren't deal-breakers. Think of things like a pool, upgraded kitchen finishes, specific flooring, or even aesthetic preferences like paint colors. You should also decide whether you'd prefer a single-family home or a condominium, as this choice will impact your lifestyle and maintenance responsibilities.

Be sure to focus on factors that can't be changed after you buy, such as the location, lot size, and price. Keep in mind that coastal properties in Honolulu come with unique challenges, including the risk of rising sea levels. It's important to stay realistic about what your budget can achieve and be ready to make some trade-offs between your must-haves and nice-to-haves in this competitive market.

Explore Honolulu's Neighborhoods

With your criteria in hand, it's time to dive into Honolulu's neighborhoods. Each area offers something different, so understanding their unique characteristics will help you find the perfect fit.

• Metro Honolulu: Ideal for those who love urban living. This area is packed with condos, restaurants, nightlife, and easy access to public transit.

• Hawaii Kai: A suburban waterfront community centered around a marina, perfect for families and boat enthusiasts. It offers privacy and space but involves about a 30-minute commute to Metro Honolulu.

• Diamond Head: Known for luxury homes, scenic views, and larger lots. It provides upscale living close to the city.

• Kailua: A charming beach town with a strong sense of community and a family-friendly vibe. Expect higher rainfall and a 25- to 35-minute commute to the city.

• Central Oahu: A suburban area popular with military families, offering a mix of older and newer homes. Commutes typically range from 30 to 45 minutes.

• Ewa Beach: A sunny suburban community with new single-family homes and townhouses. Commutes can stretch up to an hour but are balanced by the area's growth and affordability.

• Kaneohe: Offers a more rural atmosphere with single-family homes. It's a peaceful option, though commutes to Metro Honolulu are generally around 40 minutes.

When weighing neighborhood options, think about the trade-offs between cost and location. For example, Kaka'ako offers a modern, residential feel with less tourist traffic, while Waikiki provides the allure of beachfront living. Older areas like Makiki or Salt Lake may have lower monthly costs, but newer neighborhoods like Kaka'ako or Ala Moana come with modern finishes and walkability - at a higher price.

Take the time to visit neighborhoods at various times of day. This will give you a sense of traffic patterns, noise levels, and the overall vibe of the community. Check out nearby amenities like grocery stores, restaurants, parks, and shopping centers. It's also smart to research any planned developments or infrastructure projects that could impact property values. Don't overlook practical considerations like HOA fees and parking availability, as these can make or break a decision.

If you're unsure about committing to a particular neighborhood, renting in the area first can give you a better feel for what daily life would be like. And for deeper insights, consulting a local expert can be invaluable - they'll have the inside scoop on the nuances of each neighborhood.

Find My Honolulu Home

Step 5: Search for Homes and Make an Offer

With your list of must-haves and neighborhood research in hand, it's time to dive into the home search. In Honolulu's fast-paced real estate market, staying organized and acting quickly can mean the difference between securing your dream home or watching it slip away.

Set Up Listing Alerts and Attend Showings

One of the best ways to stay ahead in this competitive market is by setting up property alerts. These alerts notify you the moment new listings hit the market, giving you an edge over other buyers. Register on major real estate platforms and use the Locations mobile app to receive tailored notifications for homes that match your criteria. This tool also lets you save favorite properties, track searches, and get updates on price changes or newly sold listings.

When you're ready to view homes, preparation is key. Before each showing, review the home's essential features - like the number of bedrooms, natural light, and general condition - to determine if it aligns with your needs and whether upgrades might be necessary. During the showing, focus on these elements and take detailed notes or photos (with permission) to help with comparisons later.

By combining timely alerts with strategic showings, you'll be well-positioned to move forward with confidence when the right home comes along.

Search Properties & Set Up My Listing Alerts

Make a Strong Offer

Once you've found the home you want, it’s time to make an offer that stands out. In Honolulu's fast-moving market, submitting your best offer upfront is critical, as you might not get a second chance. Lowball offers are unlikely to succeed here, so aim to be competitive from the start.

Market data can guide your pricing. On Oahu, homes and condos typically sell for 96% to 99% of their list price. Offers in this range are often successful, so consider staying close to the asking price unless your research suggests otherwise.

Several factors influence your offer: the number of competing bids, how long the property has been listed, recent sales of similar homes, and your financial limits. Your real estate agent can help you weigh these variables and craft a strategy that balances competitiveness with your budget.

To make your offer more appealing, consider these tactics:

• Increase your earnest money deposit: A deposit starting at 0.5% of the offer price shows commitment, and a higher amount can make your offer more attractive.

• Be flexible on closing dates: Offering the seller their preferred timeline - whether it's a quick 30-day close or a longer period - can make your offer stand out.

• Limit contingencies: Waiving nonessential contingencies, like repairs, can signal to the seller that you're serious. You can still conduct an inspection for your own peace of mind.

• Cover your own closing costs: This removes a potential burden from the seller and strengthens your position.

• Include a Purchase Price Escalation Addendum: This clause automatically raises your offer if someone else bids higher, up to a set maximum amount.

For buyers with the means, a cash offer can eliminate financing contingencies and speed up the closing process. Even if you're financing, aiming for a quick closing - ideally within 30 days - can give you a competitive edge unless the seller prefers a different timeline.

A strong offer isn't just about numbers; it’s about showing the seller that you’re a serious and reliable buyer. Including a pre-approval letter, offering a substantial earnest money deposit, and presenting clear, straightforward terms all contribute to that impression. Work closely with your agent to ensure your offer is both competitive and protects your interests in this fast-paced market.

Step 6: Handle Inspections, Appraisal, and Escrow

Now that your offer is accepted and financing is in place, it’s time to focus on inspections, appraisal, and escrow. These three steps often happen simultaneously and are critical in ensuring your investment is protected and the closing process goes smoothly. Knowing what to expect during this stage can help you avoid surprises and stay on course toward owning your home.

Schedule Home Inspections

A home inspection is your chance to understand the condition of the property before committing to the purchase. In Hawaii, inspections cover major systems and structural components, such as the foundation, roof, and windows, and identify any issues that could affect the property’s overall condition.

It’s a good idea to attend the inspection in person. This gives you a firsthand look at any potential problems and allows you to ask the inspector questions. You’ll gain valuable insight into the home’s maintenance needs and possible future costs that might not be fully captured in the written report.

Hawaii does not require home inspectors to hold licenses. Because of this, it’s essential to hire an experienced inspector familiar with Hawaii’s construction methods and unique climate challenges.

Inspection costs depend on the property type. For a typical condo in Honolulu, you’ll likely pay between $300 and $450, depending on the size. Inspections for single-family homes on Oahu generally range from $650 to $850. While this might feel like an extra expense, it’s a small price to pay for understanding the true condition of your potential investment.

Keep in mind that most properties in Hawaii are sold "as is." Sellers are required to disclose known defects but are not obligated to make repairs. While you can negotiate based on the inspection results, be prepared for the seller to decline repair requests. Use the inspection findings to decide whether to move forward, renegotiate, or walk away if significant issues arise.

Once the inspection is complete, the next step is to assess the property's value through an appraisal.

Complete the Appraisal Process

The appraisal determines the property’s value and is required by your lender to ensure it’s worth the loan amount. This process involves a visual inspection of the home, an analysis of comparable sales in the area, and a review of market trends and the property’s unique features. Appraisers consider details like the home’s condition, upgrades, location advantages, and overall size and layout.

Appraisal fees in Honolulu typically range from $500 to $650 and are usually included in your closing costs. If the appraised value comes in lower than the agreed purchase price, you have a few options: negotiate with the seller to lower the price, increase your down payment to cover the difference, or cancel the deal if your offer includes an appraisal contingency. If you believe the appraisal overlooked important details, you can request a Reconsideration of Value (ROV) by providing additional comparable sales or relevant information. Your real estate agent can also work with the appraiser to ensure all key property features are taken into account.

With the appraisal complete, the final step is to navigate the escrow process.

Navigate the Escrow Process

Escrow acts as a neutral third party, handling document preparation, title checks, fund management, and the recording of the property transfer.

Hawaii’s "Good Funds" law requires escrow to clear all funds before closing. This means your closing will occur two business days after escrow receives your final payment. To avoid delays, wire your funds well in advance.

Unlike many states, Hawaii requires in-person notarized signatures for real estate transactions. You’ll need to schedule an appointment with an escrow officer or arrange for a mobile notary. If you’re out of state, remote signings can be arranged, but the notarized documents must be mailed back before the two-day deadline.

Escrow ensures that no money changes hands until all contingencies are met and the title is cleared. They also handle the proration of expenses like insurance, taxes, rents, and maintenance fees so that both parties pay their share based on the closing date. In Hawaii, the term "contingent" is used instead of "pending" to indicate that an offer has been accepted but certain conditions - such as financing, inspection, or appraisal - still need to be satisfied. Once these are resolved, the home transitions to an "under contract" status.

Typically, escrow costs are split evenly between the buyer and seller and are included in the closing costs. Escrow keeps everyone informed throughout the process and coordinates the signing of all necessary documents. The transaction is finalized when the deed is recorded with the Bureau of Conveyances.

This stage requires patience and attention to detail. By staying organized and maintaining clear communication with your real estate agent, you’ll be well-prepared to complete these final steps and move closer to owning your home in Honolulu.

Step 7: Review Closing Documents and Complete the Purchase

This final step in buying a home ties everything together: reviewing crucial documents, conducting a final walkthrough, and completing the formal closing. In Honolulu, this process ensures the transfer of ownership goes smoothly, so understanding each step is key to avoiding surprises.

Review Closing Documents and Loan Terms

Before closing day, you’ll need to go through several critical documents that finalize the deal. These include the promissory note, the mortgage or deed of trust, and the closing disclosure. These papers confirm your loan terms and officially transfer ownership.

To avoid last-minute stress, request these documents early. Ask your lender for copies of everything you’ll need to sign at closing. In Hawaii, it’s common to sign documents 3 to 5 days before the closing date, and escrow must receive all funds during this same timeframe.

Pay close attention to the closing disclosure, which outlines your closing costs. Compare it to the Good Faith Estimate you received earlier to spot any unexpected fees or changes in loan terms. Double-check key details such as the loan amount, interest rate, monthly payment, closing costs, property address, and purchase price. If anything seems off, contact your lender or agent immediately to resolve discrepancies before signing.

Once you’ve verified the accuracy of your documents, you’ll be ready for closing day.

What to Expect on Closing Day

Closing day is when the seller officially hands over ownership to you. This typically takes place at the escrow office, where you’ll meet with the escrow officer to review and sign the final documents. The escrow officer will guide you through each document, explaining its purpose and answering any questions. Take your time and proceed carefully.

After signing everything and confirming your loan funds, the escrow officer will record the deed with the Bureau of Conveyances. This step makes you the legal owner of the property. Once the deed is recorded and all conditions are met, you’ll receive the keys to your new home. Depending on the complexity of the transaction, the process can take anywhere from a quick session to several hours.

With the paperwork complete, there’s one last step: the final walkthrough.

Do a Final Walkthrough

Schedule your final walkthrough as close to the closing date as possible. This is your chance to confirm that all agreed-upon repairs are done, no new issues have appeared, and the home is in the condition you expected.

"The final walk through is an important step in the closing process." - Jasmine Eddy, Author

Bring along essentials like your purchase agreement, inspection report, repair agreements, notebook, camera, and even a small device to test outlets. Keep in mind, this isn’t another full inspection - it’s a last check to ensure the home meets the agreed standards.

Here’s what to look for:

• Test faucets, showers, and toilets for proper water pressure and drainage.

• Check lights, outlets, and major systems like HVAC, garbage disposals, and exhaust fans.

• Look for any new damage on walls, ceilings, and floors.

• Open and close all doors and windows to ensure they function and lock properly.

• Verify that the seller has moved out and left the home in "broom swept" condition.

• Make sure any agreed-upon items, like appliances or fixtures, are still in place.

If you notice any issues, document them with photos and notes, then contact your real estate agent to discuss your options. Minor concerns might be resolved with a credit at closing, but significant problems could delay the process until repairs are made.

Don’t skip the final walkthrough - it’s your last opportunity to ensure everything is in order. Resolving issues after closing can be far more complicated and costly. Protect your investment by confirming the home is exactly as promised.

Conclusion

Buying your first home in Honolulu is an exciting milestone, but it requires thoughtful planning and the right guidance. By following the seven outlined steps - from evaluating your finances to completing the final walkthrough - you’re setting yourself up for a smoother path to homeownership.

Honolulu’s real estate market moves fast, with high price points and competitive conditions. Careful financial preparation is essential, especially with interest rates keeping the market active despite the costs. To succeed here, it’s crucial to work with professionals who understand the unique aspects of Hawaii’s real estate. Local expertise is invaluable when it comes to navigating Hawaii-specific loan programs, understanding neighborhood nuances, and managing the details of escrow and closing.

That’s where Richmond Realty Hawaii comes in. Their team offers personalized support at every stage, helping first-time buyers understand everything from local school options to economic trends and neighborhood vibes. With their knowledge and experience, you’ll have a trusted partner guiding you through the process.

Ready to take the next step? Connect with the experts at Richmond Realty Hawaii today. With their proven track record and deep understanding of the Honolulu market, they’ll help you find the perfect home in the right location. From planning to closing, you’ll have the support you need to make confident decisions and start this exciting new chapter.

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