Condo Classes in Hawaii

Did you know that purchasing a condo for sale in Hawaii is much different then purchasing a condo anywhere else in the U.S.? There are three different types of condo classes in Hawaii and mainland lenders do not have experience with the two most common types that these condos fall into. Condo classes will affect your financing options, specifically down payment requirements and your interest rate.

Classes for Hawaii Condos

We have different classes for the condos on Big Island, Kauai, Lanai, Maui, Molokai and Oahu. Typically, how your condo is classified will affect you very little except when it comes to financing and property taxes. The three classes you need to be aware of are:

  • Warrantable - This type of class means that the condo meets Fannie Mae and Freddie Mac guidelines. This is considered a warrantable condo and is eligible for "agency" loan programs. There are many factors that determine a condos classification such as the owner-occupancy ratio or whether or not the HOA permits vacation and short term rentals. An owner-occupancy ratio is the percentage of owners who reside in the complex full time as their primary residence or part time as a second home. Warrantable condos must have a 50% or higher owner-occupancy ratio. Most condo complexes in Hawaii do not meet this minimum requirement.
  • Non-Warrantable - Condos which are classified as non-warrantable are not eligible for the same Fannie Mae and Freddie Mac loan programs that warrantable condos are approved for. Many Hawaii condos fall into this category because even though the condo complex may not posses any hotel like amenities outlined below under the condo-tel classification, it can still be non-warrantable for a variety of reasons, especially if the HOA allows vacation and short term rentals or the owner-occupancy ratio falls below 50%.
  • Condo-tel - A term used to describe a Condo-Hotel. A condo-tel possesses some hotel like amenities such as a front desk for checking in and out, an activity or concierge desk, and daily or weekly maid service. Due to Maui being a top destination resort community many condos for sale operate as a condo-tel. A complex that offers hotel like services or has less than a 30% owner-occupancy ratio will be considered a condo-tel.

Down Payment Requirements

  • Warrantable (down payment/max loan amount/loan type):
    • 0% down to $625,500  (VA - primary residence)
    • 3% down to $625,500  (FHA - primary residence)
    • 3.5% down to $790,000  (HomePath - primary residence)
    • 10% down to $625,500  (HomePath - 2nd home/investment)
    • 20% down to $625,500  (Agency Conventional - primary/2nd home)
    • 25% down to $1,000,000  (Portfolio Jumbo - primary residence)
    • 30% down to $1,000,000  (Portfolio Jumbo - 2nd home)
    • 30% down to $1,000,000  (Portfolio Jumbo - investment)
  • Non-Warrantable and Condo-tel (down payment/max loan amount/loan type):
    • 3% down to $790,000  (HomePath - primary, 2nd home, investment)
    • 25% down to $1,000,000  (Portfolio - primary residence)
    • 30% down to $1,000,000  (Portfolio - 2nd home)
    • 35% down to $1,000,000  (Portfolio - investment)
    • Loans over $1,000,000  (Portfolio - approved on case by case basis)
  • Private Mortgage Banking (only high-net-worth investors)
    • 40% - 50% down to $40,000,000 loan amount

Lenders on the Mainland

Most mainland lenders do not even realize they can't finance a Hawaii condo until about 2/3 through the escrow process. This usually occurs after the appraisal has been completed and your loan has been approved. At this stage, this is when a lender reviews the condo documents, resulting in a decline and the deal falls apart.

While you may be inclined to shop interest rates with a lender on the mainland when purchasing a Hawaii condo, working with Pacific Home Loans, a local lender on Maui, benefits everyone involved.