For those with low income,
but excellent credit

By Russ Lynch
Star-Bulletin

Honolulu Mortgage Co. said today it has begun offering a no-down-payment mortgage program, aimed at buyers with low incomes but excellent credit records.

The offer is part of parent company Bank of America's new Neighborhood Advantage Zero Down home loan program in 23 states and Washington D.C., providing a total of $500 million in financing.

Bank of America, which acquired Honolulu Mortgage a year ago, said it is the first time a conventional mortgage with zero down payment has been offered on such a wide scale.

It offers a 30-year, fixed-rate loan at the same interest rate charged on a 3 percent-down, 30-year mortgage, now 6.875 percent.

In Hawaii, the maximum loan in the new program is $300,000. To qualify, household income must not be more than 80 percent of the local median income. That translates to a maximum household income of $47,680 on Oahu, $34,880 on the Big Island, $44,560 on Kauai and $44,400 in Maui County.

However, there is no income limit for families buying homes in identified low-income districts, Honolulu Mortgage said.

Borrowers still must come up with closing costs, the fees that are associated with taking out a mortgage but are not part of the deposit. Still, Honolulu Mortgage said the total out-of-pocket expenses to get into a home of their own will be significantly lower than for standard loans.

A family taking out a $100,000 loan under the new program would need to come up with $2, 028 in cash. Closing costs for a $100,000 standard 30-year loan include a 3 percent deposit and would total $4,996.

The program is designed for what Bank of America called a traditionally under-served segment of consumers, those who have low incomes and excellent credit histories, but have little cash for a down payment or other upfront costs.

Honolulu Mortgage remained part of San Francisco-based Bank of America's home-loan operation BankAmerica Mortgage after the bank sold its Hawaii branches in December.

Zero-down is not a new concept for Honolulu Mortgage. It launched such a plan in 1995, and was matched by Bank of Hawaii.

The plan was not restricted to low-income families, however. Neither lender had more than a few takers, probably because the loans were at higher interest rates than standard loans, they said.

Hawaii's lenders and home developers are offering many ways to finance as they try to get some momentum into home sales.

Schuler Homes Inc., for example, yesterday advertised "thousand dollar days," promising to get buyers into homes for no more than $1,000 up front. That is being achieved by signing buyers to two mortgages, a first mortgage for 95 percent of the price and a second mortgage for most of the rest and most of the closing costs.