Can you buy an "AFFORDABLE" home in Hawaii? This is a relative question but according to the state of Hawaii there are homes for sale offered to eligible Hawaii residents today! Currently there are two state agencies that assist in this arena, one is the Hawaii Community Development Authority (HCDA) and the second is, Hawaii Housing Finance & Development Corporation (HHFDC). These two agencies have two completely different programs that have their own eligibility requirements, applications, application process and restrictions on the home purchased. HCDA has a board and there are often proposed amendments to their Reserved Housing rules, therefore eligibility, qualifications andrestrictions can change frequently. HHFDC has been around for much longer and they have a more streamlined process with little changes over recent years.
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Let's start with HCDA, are you eligible? Here are the 3 major eligibility requirements to ask yourself and if it's a thumbs up for all three, then there is a good chance that you can take advantage of their program:
1. Hawaii resident,18 years or older & will be an owner occupant of the home purchased
2. Do not have majority interest in a primary residence within the last 3 years
*Most HCDA units cap off at 120% to 140% of the Area Median Income (AMI). This is decided by HCDA when they approve a project and set the terms for that project.
As for HHFDC:
1. Hawaii resident, 18 years or older & will be an owner occupant of the home purchased
2. Does not own majority interest in a home at the time of applying.
(As opposed to HCDA's 3 year restriction)
3. Income Limits: HHFDC Income Limits 2020
*Most HHFDC units cap off between 80% to 140% of the Area Median Income (AMI). This is decided by HHFDC when they approve a project and set the terms for that project.
4. No Asset Limits--As opposed to HCDA's asset limits & this allows the buyer:
*The option to pay cash vs obtaining a loan
*The option to put more down in cash and obtain a smaller loan
*To qualify with a lower income if you have more assets
If you are still reading, you probably have a good chance of qualifying for one or both of these programs and the next step is understanding the restrictions on your Reserved or Affordable Housing unit.
General HCDA Restrictions:
1. Currently on most units there is an owner occupant restriction for 5 years. You must live in the unit for 5 years and it is your primary residence during that period.
2. You will have a buyback restriction on the unit (home) you purchase. This means, if you do have to sell within the 5 years, you will first go to HCDA and let them know you are selling and HCDA will have the first right of refusal to purchase your unit from you at a price they come up with. This price will most likely be very similar to the price you paid for the unit. Therefore, you probably will not make much of a profit, if any. This helps avoid people flipping the unit to earn a profit right away. HCDA will most likely NOT purchase the unit from you but then require you to sell it to another qualified HCDA applicant at that low price point. You can sell it yourself or with a realtor on the open market but you must abide by all the HCDA guidelines.
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3. There is usually a shared appreciation tagged on to each HCDA unit. This amount is calculated by HCDA and given to you at the time of purchase. This amount will need to be paid back when you sell your unit. Even if you sell your unit after 5 years, you will still need to pay the shared appreciation back, it does NOT go away on it's own. Also, do note, the shared appreciation can increase if the value of your unit increases by the time of your sale. There are additional calculations to refer to for exact amounts.
4. You can rent out the unit within the 5 years if you get approval by HCDA. You will then have to rent it to a qualified HCDA applicant like yourself and there is a cap for the monthly rental charge.
General HHFDC Restrictions:
1. Currently on most units there is an owner occupant restriction for 10 years. You must live in the unit for 10 years and it is your primary residence during that period.
2. You will have a 10 year buyback program as well. Very similar concept to HCDA but slight differences.
3. There is a shared appreciation program for every unit with HHFDC. They have their own calculations that increase annually up to the end of their 10 year restrictions.
4. After the 10 years you can rent the unit or sell it. If you rent it, the shared appreciation is due to HHFDC the second you move out. As for HCDA, you can rent it after the 5 year term but you do not have to pay off your shared appreciation until you sell/transfer your unit.
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