You can’t believe you’ve gotten the dream assignment in Hawaii. Who wouldn’t want to be stationed in paradise? On your days off you can head to some of the most beautiful beaches in the world or go hiking or biking while enjoying vistas that can’t be beaten.
You start dreaming about the home you’ll enjoy and excitedly hit the Internet to start looking at houses. Your heart might sink when you start seeing the prices for even modest homes in Hawaii…but wait. Don’t let the high prices scare you away. As a military member, you have a unique opportunity to build wealth by buying a home in an expensive real estate market like Hawaii.
Read on to learn how to do it!
Building Wealth with a VA Loan
You didn’t go into the military to get rich. If that were your goal you probably would have chosen a different career path. However, if you play your cards right, you can use the tools and perks available to military members to build a significant amount of wealth.
For example, the VA loan.
Real estate is a great investment for anyone. For military members, it’s a gold mine, especially in a real estate market like Hawaii where home values consistently are appreciating. The barrier for most people to entering the real estate market is generating enough capital to begin. With the VA loan, you don’t need your own money to begin.
Benefits of a VA Loan
A VA loan offers military members significant benefits over a conventional loan. You can buy a home with:
- $0 down payment
- No mortgage insurance costs
- Shop around for the best interest rates
- Government-backed loan (encourages lenders to offer good rates)
- No prepayment penalty
- The mortgage is assumable (can be transferred to a VA-eligible buyer)
The only challenging part is the upfront funding fee that VA loans charge. However, there are many factors that affect the cost of this fee. For example, if you have some money for a down payment, you can lower the cost of this fee. Also, this fee is waived for some service members such as those on disability or an unmarried surviving spouse of a veteran who died in service.
Finally, the fee can be absorbed into the loan and will not be due at closing.
Combining with the BAH
As if the fantastic terms of the VA loan weren’t enough, here’s the icing on the cake. The Basic Allowance for Housing (BAH) rates in Hawaii are pretty generous. Instead of using this money to pay rent, you can use it to pay down your VA loan. This builds equity for you instead of paying down your landlord’s loan (or lining their pockets).
How to Get Pre-Approved for a VA Home Loan
Getting a home loan isn’t too complicated for qualified service members.
Certificate of Eligibility
Start by getting a certificate of eligibility. This is easy to do with a VA-approved lender. Simply give them your service record information and they can find out online within minutes if you are eligible.
Apply for the VA Home Loan Guarantee Program
From there, you will apply for the loan. To do this, you (and your spouse if applicable) will need to provide all your financial information including employment, income information, debt, typical expenses, taxes, etc.
Get Your Pre-Approval Letter
The lender will review your documents and make a determination. If you are approved for the loan, you’ll receive a pre-approval letter that you can use to solidify your position as a solid buyer. It’s that simple!
Why Buy a Home in Hawaii?
As we’ve seen the VA is a fantastic tool for buying real estate. But why should you buy a house in Hawaii? The prices are outrageous and they just keep going up every year! Let’s look at a couple of great reasons why.
Enjoy a Lucrative Investment
Back up and think about what we just said. The fact that real estate is so expensive is exactly why you should buy a house in Hawaii using the method we’ve detailed. In any given year, real estate typically appreciates in Hawaii. This means you can buy and sell in a short time and still expect to sell at a higher price.
Imagine buying a home with no money down for $750,000. Four years later, you sell it for $850,000. You gained $100,000 in equity, plus whatever equity you’ve earned paying down your mortgage. This could range from $50,000-$60,000 depending on your interest rate.
Not too shabby for a four-year investment!
Enjoy Island Life Off the Base
Living off the base gives you a chance to see a different side of living in the islands. The culture in Hawaii is unique and is a big change from living in the mainland United States. Living off the base gives you the chance to immerse yourself and your family in this different way of life.
The best part is that you still get all the same perks of the military base, like the beaches, pool, and marina. Plus the ability to shop in the commissary, which represents nearly a 50% savings over regular grocery stores on the islands!
Greater Employment Opportunities
Aside from immersing yourself and your family more in island culture, living off-base can make it easier for your spouse to secure employment. It’s relatively simple to find a place that offers an easy commute to the base and access to employment opportunities for your spouse.
Buying a Home in Hawaii
As you can see, buying a home in Hawaii has some pretty great perks for military members both financially and for your lifestyle in general.
Interested in learning more about the benefits of buying real estate in Hawaii with a VA loan? Or perhaps you’re ready to dive in and purchase a cute little island cottage and start living the island life?
Contact our real estate team today for the best home-buying advice on Oahu!