Among families who have moved to Hawaii and bought their first home, it's common to hear stories of them only properly examining the lava zone markings on the seller's disclosure statement just before closing. To put it simply, this means they opened the regulations or disclosure documents that should have been checked before signing the contract at the last minute.

The Big Island of Hawaii is divided into nine zones by the U.S. Geological Survey based on the risk of lava flow. Properties in zones 1 and 2 are often difficult to insure through regular insurance companies, requiring coverage only through the Hawaii Property Insurance Association, which acts as a last resort insurer. The premiums can be two to three times higher than standard fire insurance. If you are unaware of this fact before the contract, you may find yourself in a panic when insurance coverage is blocked during the loan approval stage, so be sure to check the lava zone number of any properties you are interested in first.

According to Redfin data, the median sale price in Hilo is around $555,000, which has seen a slight increase from a year ago. The average market exposure time is 94 days, and the market competition index is only 11 out of 100, indicating that competition is not very fierce. The average sale price is about 5% lower than the asking price. In simpler terms, this means it's a market where you don't have to rush to make an offer, giving you ample time to carefully review the paperwork. Comparing neighborhoods with low and high lava zones makes it easier to understand why there are price differences. To put it simply, within Hilo, properties in lower zone numbers tend to have easier insurance access and higher sale prices, while those in higher zone numbers are cheaper but come with restrictions on insurance and loans.

The property tax rate in Hawaii County, which includes the Big Island, is around 0.35%, one of the lowest in the nation. However, before celebrating the low tax rate, it's important to note that insurance premiums can fill that gap. Even in areas with low lava zones, hurricane or flood-related insurance premiums may apply separately, so it's advisable to calculate your actual monthly burden by combining property taxes and insurance premiums.

There are cases where buyers visit properties without pre-approval and later discover that the home they want is in a specific lava zone, making it difficult to secure a loan. To put it simply, if you get emotionally attached before confirming loan eligibility, it becomes hard to backtrack. It's safer to ask your lender about the lava zone of the property you're interested in and the possibility of obtaining insurance during your consultation.

Closing costs should be prepared at around 2% to 5% of the sale price, and it's wise to set aside contingency funds considering that insurance premiums may be higher than expected. If you use all your funds for the down payment, you may find it difficult to respond to variables like insurance increases after moving in.

It's also advisable not to rely on just one lender but to compare at least three. Due to the lava zone, the number of lenders willing to provide loans may be limited, so inquiring with multiple lenders early on to compare terms can help avoid a situation where your options become narrow later. Additionally, it's wise to think not only about the property you currently like but also about whether you might have difficulty finding a buyer in the future due to lava zone and insurance issues when reselling the home. When calculating closing costs based on the sale price, a property priced around $555,000 would have closing costs ranging from $11,000 to $28,000, so it's advisable to prepare this amount separately from the down payment. Even after receiving pre-approval, it's safer to maintain your credit score and debt ratio until closing. It's also a good idea to look into school district information. Please check the assigned schools in areas of interest to Korean families near Hilo before signing a contract.

Ultimately, in a market like Hilo, where regional characteristics are distinct, it's important to check not only the sale price and property taxes but also the possibility of obtaining insurance and related disclosure documents in advance. This article is not investment or legal advice, and it's recommended to consult real estate and insurance professionals before finalizing any contracts.