Q. Is It Important to use a Hawaii lender when buying Hawaii property? A. Yes. After receiving several letters similar to the one below...

Article by Joan Martin, First Hawaii Title Corporation published in The Maui News 9-1-02

Dear Joan,

We have bought many properties in Montana, which is our home, and now we are planning to buy a condominium on Maui. Our real estate agent on Maui is encouraging us to use a Maui lender, but we already work with our local bank that knows us really well and does all of our loans. We have high credit scores and plenty of assets. Why is our real estate agent suggesting that we use a Maui lender?

Signed,
Great Credit in Great Falls

Dear Great Falls:

I’m going to give it to you straight from the shoulder, stranger. There’s a good reason your agent is advising you to use a local lender.

When taking out a loan there are two components. First, the lender wants to make sure you have the capability to repay the money they lend you. Second, they want to know enough about the property you are buying to feel comfortable in making the loan. Remember, the property secures the loan and requires a judgment by the lender that it is a reasonable risk to take.

In your situation it sounds like your bank is familiar with your ability to repay the loan and has been able to do loans for you in Montana based on your credit scores, monthly cash flow and liquid assets. This takes care of the first component.

Now, let’s look at the second part of the equation. In Hawaii, and specifically Maui, depending on the property you select, there are a number of factors that come into play which your banker in Great Falls may not be clear about when looking at your loan application.

We have condominiums that are fee simple and others that are leasehold. We have both low-rise and high-rise condominiums. We have condominiums and condo-tels. Some are with Mauka [mountain] views and some are with Makai [ocean] views.

The important thing to realize is that many of these factors are unique to our location and they go into the equation that will determine the type of loan, the terms of the loan and the amount of down payment you will need to qualify for your loan.

When you are buying leasehold property the lender wants to know the terms of the lease. The overall number of years remaining on the lease and the number of years remaining before the lease is renegotiated can determine the type of loan you can get. The lender will view a low-rise condominium differently than a high-rise condominium. They also want to know the location because some areas have more value than others. In addition, a lot of the Maui properties have a front desk and allow nightly rentals, these are considered to be condo-tels. If you are purchasing a condo-tel the lender may charge you different rate, or may require a larger down payment. These are things that Maui lenders know because they do this kind of work all the time. I believe the reason your real estate agent is recommending a local lender is to insure the process goes as smoothly as possible.

I have had a number of buyers in my office with stories of a lender they have known for years who told them in the days before their loan was to record that they could not get final loan approval because senior management was not comfortable with the property securing the loan. There was nothing wrong with the property; the lender simply had nothing similar in their portfolio of loans. In many cases a local lender came riding in like the cavalry to pick up the pieces and rescue the deal.

Our local experienced lenders are familiar with the nuances of Maui properties. They have the ability to gather information needed early in the process and submit the loan under a structure that will permitted for the specific property.

Maui has a lot of good lenders. If your credit is good they will be able to quickly verify it and have you in your new home trouble free and lickety-split.

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