The state buys equity in new starter homes to bring down costs
Posted: September 27, 2024
A state pilot program allows qualified educators to receive zero-percent, 30-year second mortgage loans worth up to 20% of the cost of their new homes depending on the type of unit purchased.
The Hawaiʻi Housing Finance and Development Corporation program, funded with a $10 million appropriation from the state Legislature, makes it possible for the HHFDC to reduce the qualifying purchase price of homes for people working in professions facing shortages, such as:
- Education
- Healthcare
- Law enforcement
- Agricultural field work
The program is called DEP, which stands for the DURF (Dwelling Unit Revolving Fund) Equity Program.
To participate in DEP, educators must:
- Not own any real property (anywhere in the world)
- Not have received gift funds
- Be a Hawaiʻi resident
- Be an owner-occupant for as long as the program is in place
HHFDC Development Branch Chief Randy Chu says the program is aimed at helping people buy their first homes.
“If you help them purchase their first home, maybe they will stay and not move away,” Chu said.
“We see a need and we want to address it,“ he said, noting the program is the first of its kind in the country.
The program requires a 5% down payment.
Two projects in development in the urban Honolulu area are currently available in the program, with more expected to be added in the weeks and months ahead.
They are:
- Kuilei Place, with 23 2-bedroom, 1-bath units designated for the program. The state would contribute $100,000 of the cost of each unit for qualified participants. To qualify for units at Kuilei Place, educators’ household income cannot exceed 140% of the area median income, which is $136,500 for one person, $155,960 for two people or $175,420 for a family of three.
- Modea, with 12 studio, 1-bath units and 13 1-bedroom, 1-bath units available for the program. The state would contribute 15% of the sales price for studios and 10% for 1-bedroom units. See a Modea DEP price list.
For example, at Kuilei Place, if an apartment costs $500,000, HHFDC would purchase the equity in a second mortgage, paying $100,000 of the cost, so the buyer would only need to qualify for a $400,000 loan. They would have up to 30 years to pay the state back for the $100,000, without any interest and they would not have to make payments to the state until year 30, unless certain trigger events occur, such as adding a name to the title or refinancing.
Read a summary of the program with links to the two current projects. Other projects may be added soon.
Teachers need to tell the developers that they want to participate in the DEP program, and ask developers’ representatives if they qualify. The HSTA encourages its members to apply with the developer, even if there’s a waiting list for qualified units, because other applicants may drop out of the program or not be eligible.
When other projects are added to the program, the HSTA will update this article with new options.
HHFDC officials say they are also hoping to add neighbor island projects in the future.
Read this brochure about the program.