The County’s Home-Buyer Loan Program makes low cost loans to low-income, first-time Home-Buyers on Kaua‘i for the purchase of an existing dwelling unit or the construction of a new dwelling unit to be used as their primary residence.  The County finances its loans with federal funds with the goal to increase home ownership opportunities for lower-income households.  See HUD Income Limits for income eligibility.

Candidates for Home-Buyer Loans take a series of home ownership classes offered by the Housing Agency.  Upon completion of the class, applicants can purchase a home not to exceed HUD’s sale price limit, currently $187,300.  The typical homebuyer is expected to obtain as much financing as possible from a conventional lender, then the County provides the additional mortgage money to complete the purchase at a reduced interest rate and with a seven year deferred repayment period.

See Types of Home-Buyer Loans for a description of the three different  loans available from the County for first time buyers.   The two loans to purchase an existing home require a minimum down payment of 1.5% and the construction loan requires ownership of the site and at least a 25% equity position.   All loans are at 3.0% interest.

Other important requirements under the Home-Buyer Loan Program are:

• only single family homes are eligible,
• the house must be vacant or owner occupied when a sales contract is accepted,
• houses in a 100-year flood area are ineligible,
• the County’s 10-year Buyback Restriction on Sale or Transfer, and Use will be attached to the deed,
• the borrower must reside in the property as their permanent, primary residence for the term of the loan, and
• additional mortgage loans will only be allowed for home improvements or to pay catastrophic medical expenses.

The County of Kaua‘i began its Home-Buyer Loan Program in 1997 to assist low-income Kaua‘i residents become first-time home-buyers.  The program provides a 3.0% fixed rate loans to eligible borrowers, with a 98.5% loan-to-value ratio and 1.5% down payment from the borrower.  The maximum loan amount is $184,490.00.   For houses with less than three bedrooms, small maximum loan amounts apply.   The maximum sales price for a house is $187,300.00.  The three specific types of Home-Buyer loans available are:

Gap Mortgage Loans are provided to borrowers who are able to qualify for a first mortgage loan from a participating lender for part of the money needed to purchase a home, but not all of money the needed for the purchase.  The amount of the Gap Mortgage Loan is the difference between the purchase price and what a participating lender will loan an applicant and the applicant’s down payment.  For the first seven (7) years, the borrower only pays monthly loan payments to the participating lender’s loan.  The 3.0% simple interest accrues to the loan balance.  After the seven year deferral period, the borrower makes monthly payments for twenty-three (23) years to fully repay the original loan amount and accrued interest.

Primary Mortgage Loans are provided to borrowers who are not able to qualify for a loan from a participating lender.  Primary Mortgage Loans over $40,000 require the borrower to make monthly payments of principal and interest for fifteen (15) years.  The monthly payments are made affordable by amortizing the payments over a larger period of time.  Amortization periods available are from ten (10) years to thirty (30) years and are determined by the borrower’s ability to pay.  After the first fifteen (15) years, the borrower pays-off the County for the remaining principal balance (balloon payment).  However, if the borrower is still low-income eligible, the borrower may elect to extend the term of their County loan for up to fifteen more years to fully amortize the loan.

Construction Mortgage Loans may be provided to borrowers who already own a buildable lot and have enough equity for a 75% loan-to-value ratio with the land and proposed dwelling to be constructed.  Loans are for one year only with simple interest accruing on the amount of funds drawn down during the construction.  After construction and at the end of the one year term, borrowers must refinance the construction loan.  Borrowers may obtain a Gap or Primary County loan provided they are still income eligible.