Volume 2, Issue 6
2nd Quarter 2008

Jim Wagner’s Real Estate Q & A Corner
Local Lenders Know Best

Hi Jim,

I made an offer on a house on Maui and started researching mortgage rates. I found a guy on the internet who said he’d have no problem doing the loan, and the rate was great. My agent, however, tells me I should use a Maui lender who is a little more expensive up front. I like my agent, but is he really looking out for my best interest by recommending someone he probably knows on Maui?

              -Lloyd B., Dallas, TX

Well, Lloyd, almost any lender would like a shot at your loan. They quote rates on the internet or at your bank in Texas and make promises that some may even believe they can keep. But buying a house on Maui isn’t like buying in Dallas. Relationships matter. Coldwell Banker Island Properties put around a billion dollars in loans through Maui lenders last year. Those lenders know they need to take care of our clients. They know local appraisers who are timely and fair. Such relationships mean your loan will close at the quoted rate and in the time frame you need.

In general, mainland lenders don’t really know Hawaii’s market. What if you were buying a house with an ohana? Most mainland lenders see that and think duplex or commercial property. Their underwriters might look at it strictly as an investment property even though you intend to live in it.

Last year, I had a buyer in contract on a house and cottage in Maui Meadows who insisted on using his mainland uncle for the loan. They were late with everything because the uncle wasn’t familiar with the house/cottage package so common on Maui. The appraisal was late. Twice the loan package was returned by underwriters who didn’t fully understand the property. When they were finally ready to close, the loan market had gone sideways and the program they qualified for was gone. The sale fell through and the sellers lost the replacement property they had bought. I’ve known sellers who, once burned, won’t accept an offer unless the buyer is qualified by a local lender.

Bottom line, Lloyd, Maui lenders know Maui real estate. While the condo you bought may qualify for conventional financing, if you are buying a property to put into vacation rentals, it may be a condotel and as such cannot be sold off to Fanny Mae and Freddie Mac. Your internet guy may have no idea what that is. What happens when two weeks before closing he realizes this complex is not 80% owner occupied and he can’t get the loan? Is he licensed in the State of Hawaii? He better be.

Trust your agent on this one, Lloyd. By recommending a local lender, he is looking out for you.

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