Army Capt. Gabe Zinni used the hazardous-duty pay he earned in Afghanistan and new purchasing power from the Veterans Administration to pay $535,000 for a house on O'ahu — all while Zinni was surrounded by bunkers and sand bags along the Pakistani border.

Zinni, a howitzer battery commander, lived in an adobe-style "mud hut" as he checked out homes through e-mail sent by his real-estate agent, Bee Tan of Prudential Locations. Even though he was in a forward operating base on the opposite side of the planet, Zinni sealed the deal on a 1,700-square-foot, three-bedroom, two-bath home in 'Ewa Beach with no money down.

“One of the benefits about being deployed is that you’re not spending a lot of money,” said Zinni, 30, who returned to Schofield Barracks in March. “With the money I saved during the deployment, I said, ‘I’ll put it into a house.’ ”

Zinni represents a generation of active-duty military people in the Islands who were all but excluded from Hawai'i’s red-hot housing market before this year. But armed with additional pay while on deployments to places like Iraq and Afghanistan, increased housing allowances and the more than doubling of the size of VA mortgage loans, Zinni and others are able to buy homes in Hawai'i in spite of record high prices.

“Active-duty military are now real players,” said Tom Serocca, loan guaranty officer for the Veterans Administrations Hawai'i regional office.

“For the first time in years, active-military members have a leg up on local workers,” Serocca said. “All of a sudden, they are a significant portion of the buying public.”

Perhaps the most important change is the law signed by President Bush in December that automatically links the size of VA mortgage loans to the maximum loan amounts offered by mortgage giant Freddie Mac.

For Hawai'i, Alaska, Guam and the Virgin Islands, the change means the size of mortgages that military people can obtain through the VA — with no money down — shot up from $240,000 to $539,475.

The Hawai'i VA office normally arranges about $70 million worth of loans per year but expects the amount to rise to $130 million this year. The size of individual loans also has increased about 125 percent, Serocca said.

DEMAND FOR HOMES HIGH

Serocca said the best measurement of military home-buying is the number of home appraisals ordered for VA loans in Hawai'i, which will jump from 425 in 2004 to more than 530 so far this year.

More military people will likely buy real estate in the next few years as existing Army, Navy, Marine, Coast Guard and Air Force homes on bases across O'ahu are temporarily taken out of commission to be demolished or renovated in the biggest military housing project of its kind.

At the same time, another 3,700 soldiers will be assigned to Schofield Barracks by 2011 and potentially thousands of additional sailors and their families could arrive on O'ahu if an aircraft carrier group is homeported at Pearl Harbor.

“As time goes by and the prices get ever so higher, (military families) are going to be an increasingly important factor for Realtors simply because they can afford to make the payments,” Serocca said. “And there’s going to be more of them.”

Real-estate experts say it is unclear what effect military buyers will have on Hawai'i’s housing demand or on prices.

“I don’t think there are enough of them to push the market,” said Michael Sklarz, the Honolulu-based head of analysis for Fidelity National Financial, “but there’s really no way to gauge.”

Still, for the military families that take advantage of the new rules, the impact can be dramatic.

The no-down-payment provision of the VA mortgage means that Elena and Tom O’Brien still have money to fix up the one-bedroom Waikïkï condominium they just bought for $300,000.

As she dug herself out from a mountain of moving boxes that filled their 560-square-foot condominium, Elena O’Brien said, “Its nice that we didn’t have to put that money down and can spend it on renovations.”

VA MORTGAGE HELPS

Elena, 29, and Tom, 27, — a Coast Guard petty officer first class — plan to spend $12,000 on wood laminate flooring, drywall repairs for the living room, a closet system for their bedroom and new kitchen cabinets and counters for their 1974-era condo.

Before Bush increased the VA mortgage amounts, the O’Briens doubt they would have been able to swing the down payment on a conventional loan that would have also required them to pay mortgage insurance.

“We’ve lived in a lot of places, moved around a lot and have been renting for a long time,” Elena said. “Hawai'i is a place we know were going to be for at least four years, and we really wanted to buy something. But we probably wouldn’t have been able to afford a $300,000 place on our own.”

Army Chief Warrant Officer 2 Ryan Turville, 31, has joined the hordes of people who regret not buying real estate sooner on O'ahu.

Turville originally considered buying a single-family home in Waialua with his wife, Gina, 30, and their four children during his first tour in Hawai'i in 2000 as the market plodded along.

When they returned in March for Turville’s assignment flying Chinook helicopters out of Wheeler Army Air Field, “We saw the prices and kicked ourselves,” Turville said.

They ended up using a VA loan to buy a three-bedroom, two-bath, 1,100-square-foot condominium in Mililani for $190,000 that needed an overhaul.

Although the purchase price fell well below the old VA maximum loan rate, Turville said, the increased limit of $539,475 encouraged them to think about buying.

“That really pushed it for us,” Turville said. “I don’t know that I would have even started looking without that VA loan.”

The money they saved from a down payment means they can now spend $5,000 to $8,000 on renovations.

But some real-estate agents and sellers don’t like to do business with buyers using VA-backed loans, said Christine Burton, a loan officer with Charter Funding, which regularly deals with military people.

“Unfortunately, in this market, real-estate agents aren’t real familiar with the VA loan,” Burton said. “It requires a little bit more paperwork, so they discourage their sellers from accepting VA loans. Its been hard for a lot of veterans to actually use it. But a lot of these guys can now get loans that they wouldn’t qualify for before. Or they can qualify for a much bigger property. It gives them real buying power.”

Leona Soto, broker in charge at Century 21 Liberty Homes in Mililani, has been involved with about 40 VA loans this year.

“A lot of people that come through here are used to owning property on the Mainland,” she said. “Or for a lot of younger ones, it might be their first purchase. But the VA lets them come in with nothing down.”

Tan, who coordinated Zinni’s sale while he was in Afghanistan, has represented a handful of military clients so far this year. She especially likes the fact that more of them are now living off base in civilian neighborhoods.

“Were seeing more of what they’re going through, and it really sheds light on the sacrifices they’re making — being deployed, putting their lives on the line,” Tan said. “And they’re having more of an appreciation for life in Hawai'i. That’s why they want to settle down here.”

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.